Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

KING'S CROSS RAILWAYS BILL

Motion made, and Question proposed,
That the Promoters of the King's Cross Railways Bill shall have leave to suspend proceedings thereon in order to proceed with the Bill, if they think fit, in the next Session of Parliament, provided that the Agents for the Bill give notice to the Clerks in the Private Bill Office not later than the day before the close of the present Session of their intention to suspend further proceedings and that all Fees due on the Bill up to that date be paid;
That on the fifth day on which the House sits in the next Session the Bill shall be presented to the House;
That there shall be deposited with the Bill a declaration signed by the Agents for the Bill, stating that the Bill is the same, in every respect, as the Bill at the last stage of its proceedings in this House in the present Session;
That the Bill shall be laid upon the Table of the House by one of the Clerks in the Private Bill Office on the next meeting of the House after the day on which the Bill has been presented and, when so laid, shall be read the first and second time and committed (and shall be recorded in the Journal of this House as having been so read and committed);
That all Petitions relating to the Bill presented in the present Session which stand referred to the Committee on the Bill, together with any minutes of evidence taken before the Committee on the Bill, shall stand referred to the Committee on the Bill in the next Session;
That no Petitioners shall be heard before the Committee on the Bill, unless their Petition has been presented within the time limited within the present Session or deposited pursuant to paragraph (b) of Standing Order 126 relating to Private Business;
That in relation to the Bill, Standing Order 127 relating to Private Business shall have effect as if the words 'under Standing Order 126 (Reference to committee of petitions against Bill)' were omitted;
That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during the present Session;
That these Orders be Standing Orders of the House.—[The Chairman of Ways and Means.]

Hon. Members: Object.
Debate to be resumed tomorrow.

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

Foreign Affairs Council

Mr. Baldry: To ask the Secretary of State for Foreign and Commonwealth Affairs what items he expects to be discussed at the Foreign Affairs Council meeting on 17 July.

The Minister of State, Foreign and Commonwealth Office (Mrs. Lynda Chalker): Discussion is expected on follow-up to the European Council and on relations with the United States, eastern Europe, Gulf states and African, Caribbean and Pacific countries.

Mr. Baldry: I thank my right hon. Friend for that reply. Will she confirm that the Foreign Affairs Council collectively will leave China in no doubt as to Europe's total abhorrence of recent events in that country? Will it clearly signal that any help in relation to China's future economic performance will depend upon its demonstrating a preparedness to behave towards the people of Hong Kong in a manner that commands the support of the European Community? Is not the best guarantee for the people of Hong Kong the preparedness of Europe and the civilised world in general to act together in their relations with China?

Mrs. Chalker: China should be in no doubt about our view. In Madrid on 27 June, the member states agreed on four actions: the suspension of military co-operation; an embargo on trade in arms with China; the suspension of ministerial and other high-level contacts; and the postponement of all new co-operation projects.
At the United Nations in Geneva we raised the issue of human rights in China and we are taking every opportunity to enforce our condemnation of the violent repression of peaceful demonstrators and the tragic loss of life. Yesterday, European Community colleagues agreed that the troika should make a demarche in Peking to underline the Community's position and to convey the request for independent observers to have access to trials and to prisons.
China is in absolutely no doubt that Hong Kong and the remainder of the world believe that matters went very badly wrong, and that it is for China to show its preparedness to work with the remainder of the world.

Mr. Alton: When Ministers are considering Hong Kong, will they also examine the position of Portuguese citizens in Macau who will be given the right to live in any European Community country after Macau returns to China? Does the right hon. Lady accept that it will create a difficulty—indeed, a major discrepancy—if Hong Kong citizens are not treated in the same way?

Mrs. Chalker: I understand the hon. Gentleman's point. I shall be meeting my Portuguese opposite number next week and we shall discuss these matters.

Mr. Temple-Morris: During that meeting will my right hon. Friend raise the increasingly important questions of the enlargement of the Community and what constitutes Europe? Will she bear in mind her distinguished school days at Roedean when, I hope, she was taught that Turkey was not part of Europe? Does she agree that the sooner that that is made clear to everyone, including Turkey, the better off we will all be?

Mrs. Chalker: Turkey's application to the Community, which is currently with the Commission, will produce an opinion by the end of the year. Whatever the aspirations of Turkey and many other countries, I remind my hon. Friend that the Community is united in the belief that its top priority is to complete the single market. Enlargement is a matter very much for the future.

Mr. Robertson: Should not the next Foreign Affairs Council consider the whole question of economic help for eastern European countries that are struggling towards more democratic systems? Has not the West's response so far been feeble, half-hearted and lamentably inadequate, given the economic plight facing the democratic reformist forces in Poland and Hungary?
If the West is genuinely interested in the return of political choice to those nations and in keeping a check on the forces of reaction that threaten them, is not a more generous and imaginative response from Europe urgent? When will this country put in hard cash, even if it is tied and conditional? Sympathetic words about freedom are a poor substitute.

Mrs. Chalker: That matter was discussed thoroughly yesterday under the heading of European co-operation. The Community is in the process of negotiating an economic and commercial agreement with Poland, and the position in respect of other countries will be investigated in detail when the opportunity arises. We have no doubt whatsoever that those countries should be assisted to make their own moves towards real democracy and to the modernisation that they need.

Mr. Michael Morris: When my right hon. Friend meets her colleagues, will she raise the worrying problems arising in southern Asia, particularly in Sri Lanka? It appears that unless the Indian presence leaves Sri Lanka by 29 July there will be a mass exodus to Europe.

Mrs. Chalker: That matter is not on next week's agenda, but we shall see whether it can be raised during the discussion that we shall have at lunchtime.

European Commission

Mr. Orme: To ask the Secretary of State for Foreign and Commonwealth Affairs when he next expects to meet the President of the European Commission; and what he expects to discuss.

The Secretary of State for Foreign and Commonwealth Affairs (Sir Geoffrey Howe): I expect to meet President Delors at the economic summit in Paris from 14 to 16 July, where a range of international economic issues will be discussed.

Mr. Orme: When the Foreign Secretary meets the president, will he discuss the social charter? Will he also withdraw his recent offensive remarks about the charter and recognise that it means a great deal to working people throughout the Community? Why is Britain alone in opposing it?

Sir Geoffrey Howe: I do not feel the need to withdraw any offensive remark. I made it very plain that we attach great importance to the social dimension of improving economic co-operation in Europe. We do not believe that a Communitywide charter imposing obligations across the board is the best way of achieving that. To impose a whole range of legislation of a uniform kind on different societies would not be in the best interests of any of them, and would be inimical to our successful fight against unemployment. The best test of a social charter is the way that the United Kingdom has succeeded better than any other European country in bringing down unemployment.

Mr. Cyril D. Townsend: Does my right hon. and learned Friend agree that it is high time that the European Community built on the Venice declaration? Following the Likud block vote on the peace process in the middle east, is it not time to look again at Israel's privileged commercial position in relation to the Community?

Sir Geoffrey Howe: My hon. Friend may not have noticed that at the conclusion of the European Council meeting in Madrid last week we issued a long declaration on the middle east which built, as he wants, on the Venice declaration. It made a number of significant additions and drew attention to the continuing deterioration of the situation in the occupied territories and to the action that should be taken. Yesterday, European Foreign Ministers agreed that the question of giving economic help to the occupied territories should be examined.

Mrs. Clwyd: Will the Secretary of State press for the European Community's ambassadors' report on human rights abuses against the Kurds in Iraq to be made public? Will he also condemn, and ask the Community to condemn, the mass deportation of the Kurds from northern to southern Iraq which is a disgraceful abuse of human rights? Will he press for journalists and other observers to be allowed into the Kurdistan section of Iraq as soon as possible?

Sir Geoffrey Howe: The hon. Lady's points coincide with the views of the Government. I shall seek an opportunity to bring them to the attention of the Community's Foreign Ministers.

Sir Richard Body: To revert to the supplementary question of the right hon. Member for Salford, East (Mr. Orme), will my right hon. and learned Friend remind Mr. Delors when he next meets him that he purloined the term European social charter; that it was drafted in the Council of Europe and ratified by our country very soon afterwards; and that we were in the forefront of the countries that put it into practice?

Sir Geoffrey Howe: My hon. Friend is right to draw attention to the parallel between the documents, although "purloin" overstates the case slightly. At the Rhodes European Council it was concluded that a study should be made of the existing provisions of the Council of Europe social charter. There is a sharp distinction between that and the present draft of the European Community social charter: the latter would impose obligations across a wide spectrum, in contrast to the former. My hon. Friend is also right to point out that we are among the countries that have ratified the charter; I think that I am right in saying that three Community countries have not yet done so.

Mr. Kaufman: Following the question put by my right hon. Friend the Member for Salford, East (Mr. Orme), may I ask whether the right hon. and learned Gentleman recalls that, when he last answered questions and I asked him what was Marxist about the social charter, he cited the placing of workers on the boards of companies? Will he therefore—drawing on his knowledge of the work of Karl Marx—provide marked copies of the passages that prescribe that workers should be placed on the boards of companies, and draw them to the attention of Chancellor Kohl of the Federal Republic of Germany, where it is


Government policy to place workers on boards? I am sure that Chancellor Kohl will be dismayed to learn that he has been pursuing Marxist policies.

Sir Geoffrey Howe: The distinction that we wish to draw is between an approach that depends on dividing industry into two sides and our own approach, which has been exemplified by the massive extension of employee share ownership. At the time of my first Budget about half a dozen schemes were in existence; about 1,600 are available now. We do not consider it helpful, when Britain has been making such massive progress in that respect, to begin creating a new system founded on the division of industry.
If I were to seek advice about any aspect of the teachings of Karl Marx, I should be delighted to appoint the right hon. Member for Manchester, Gorton (Mr. Kaufman) as my research assistant.

European Political Co-operation

Mr. Ian Taylor: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will report on the outcome of the Ministers European political co-operation meeting of 11 July.

Sir Geoffrey Howe: I attended the meeting in Paris. Developments in the Soviet Union and eastern Europe were the main subjects. We discussed Mr. Gorbachev's visits to Paris and Strasbourg. Our agenda also covered the middle east, southern Africa, the Horn of Africa, Cambodia and China. I stressed the importance to Hong Kong of international support. We agreed statements on Cambodia and the conference on security and co-operation in Europe, copies of which have been placed in the Library of the House.

Mr. Taylor: Was my right hon. and learned Friend able to discuss with his Community colleagues President Gorbachev's latest plans for the architecture of the common European home? Did they note President Gorbachev's warning that the superior western European economic system should not try to tempt the eastern bloc countries away from their Socialist principles? Does that not mean that the eastern European countries are free to live in their own rooms in the common European home, as long as they employ Soviet interior decorators?

Sir Geoffrey Howe: We did not discuss the matter in such meticulous architectural detail as my hon. Friend suggests, but we agreed that Mr. Gorbachev's speech called for no direct response from us. The Twelve will continue to make their best contribution to the development of East-West co-operation by underlining, above all, the attractiveness of the western model. We emphasised the fact that the common European home is based on European Community designs on western European foundations, and we hope that countries in the rest of Europe will be free to follow that example.

Mr. Tony Lloyd: In pursuing the idea that Community countries should co-operate over their attitude to China, does the Foreign Secretary believe that his position is somewhat clouded by the fact that the British Government, through the Department of Trade and Industry, are still actively sponsoring trade missions to China? Does that not undermine what he is trying to achieve?

Sir Geoffrey Howe: The hon. Gentleman will find that those matters are being considered separately and very carefully, case by case. For example, the proposed Sino-British Trade Council exhibition which was to have taken place in Peking next November has been postponed, and other matters are being treated in a similar way. However, there is no intention—nor should there be—of imposing an economic embargo or economic sanctions on China. None of our European Community partners has adopted that view; nor has the United States or Japan.

Sir Peter Hordern: Was my right hon. and learned Friend able to pursue the goal of closer European economic co-operation by reminding the Council of Ministers of the admirable speech of Karl Otto pöhl in Munich on 22 June in which the president of the Bundesbank said that he saw no great purpose in forming either a common European currency or a European central bank? Would it not be better to pursue the policy of the president of the Bundesbank—of a step-by-step development—than to go forward in rash philosophical leaps, which seems to be the metier of Mr. Delors?

Sir Geoffrey Howe: I share my hon. Friend's admiration of the speech by Karl Otto Pohl. It was very forcibly drawn to the attention of the European Council at the meeting in Madrid, which was attended by my right hon. Friend the Prime Minister and myself. It was also no doubt in the minds of the Finance Ministers who met on Monday this week to discuss the matter. It was they who discussed it, not we the Foreign Ministers. However, my right hon. Friend the Chancellor of the Exchequer certainly underlined the very important point that has been made by my hon. Friend: that we must address the matter stage by stage, according to the principles that he has outlined.

Mr. Campbell-Savours: In the light of the great concern that is being expressed by the people of Hong Kong about their future and of the fact that in his first reply the Foreign Secretary said that these matters were raised at the meeting, what is the position of the various Foreign Ministers? Is there an understanding that the problem cannot necessarily be resolved within the United Kingdom? Do people accept that there must be some form of international settlement?

Sir Geoffrey Howe: The primacy of the United Kingdom's position is accepted on all sides. The Foreign Ministers at their meeting this week recognised—as on previous occasions when they have discussed it—the importance of bringing home to the People's Republic of China our shock at what has happened there. That was why we agreed yesterday that the Community ambassadors in Peking would make specific representations about the need for observers at trials and in relation to imprisonment. We also sustained the decisions already taken in relation to economic, political and military matters and agreed that those principles would be followed.

Middle East

Sir Dennis Walters: To ask the Secretary of State for Foreign and Commonwealth Affairs, if he will make a statement on progress towards peace in the middle east.

Mr. Wood: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the middle east peace process.

The Minister of State, Foreign and Commonwealth Office (Mr. Waldegrave): In a major statement in Madrid last month the European Council appealed to the parties to seize the present opportunity to achieve peace. The Twelve made it clear that the election proposals put forward by Mr. Shamir could contribute to the peace process but that the PLO must participate in negotiations. We fear that the Likud decisions last week, if translated into Israeli Government policy, will make progress much more difficult.

Sir Dennis Walters: Does my hon. Friend recognise that the Shamir offer to hold free elections on the West Bank has now been exposed for the fraud that it always was? He was saying privately weeks ago that it was merely a device to buy time. Now he has had to come out publicly. What do we intend to do now to get the peace process moving in a serious manner?

Mr. Waldegrave: We intend to deal with the Israeli Government, not with internal party factions. We shall urge the Israeli Government that the peace proposal that they made had the germ of an idea in it, that it should be developed and that it should not be limited in the way that the Likud motions seek to limit it. We shall urge the other side—the Palestinians and the PLO—not yet to despair of developing those election proposals.

Mr. Wood: Does my hon. Friend think that any international measures could be taken to ensure free and fair elections in the occupied territories? Is my hon. Friend pressing on Israel and the United States the need to have an international peace conference before there is further and much more serious loss of life?

Mr. Waldegrave: Yes, and the Twelve reinforced that commitment to a peace conference. Our sense of urgency is increasing day by day with every new tragedy, including the terrible killing of 14 people in a bus on the way to Jerusalem. Every one of those tragedies, on either side, shows how little time there is left.

Mr. Steel: The Minister cannot separate the identity of the leader of the Likud from the identity of Prime Minister Shamir, when they are the same person. Does he think that the recent statements from Mr. Shamir go back on the undertakings that he gave to Her Majesty's Government, the Twelve and the United States Government? Will he therefore take a more vigorous stance on the matter?

Mr. Waldegrave: I understand the right hon. Gentleman's concern. It would be unwise for me to predict the final outcome of the Israeli Government's position. As we know, there may be changes in the coalition. We stand by our view that that proposal for an election seemed to offer the hope of progress, and the last thing that anyone should be seeking now is to abort it before it is properly born.

Mr. Ernie Ross: The Minister must realise that Mr. Shamir's statement last Wednesday, as Prime Minister of Israel and as the leader of the Likud party, had two clauses. The first sought to ensure that there should be no negotiations with the PLO, no Palestinian state in any part of the Eretz Israel and no sovereignty over any part of the

Eretz Israel. Clause 2, which is far more important, sought to make all those decisions binding, in the Cabinet and in the Knesset, on all Likud members. How can we expect the Palestinians or anyone else to accept that any Israeli peace plan remains?

Mr. Waldegrave: I feel no more optimism than the hon. Gentleman does after the events of that Likud meeting. However, I am well aware, as is the hon. Gentleman, that some members of Likud, such as Mr. Ezer Weizman, take a very different line. Before we despair of the Israeli Government's position, let us finally see what it is.

Sir Philip Goodhart: Does my hon. Friend really think that the peace process in the middle east will be helped if we refuse to sell gas masks to Israel at the same time as we contemplate selling military aircraft to Iraq, a country which has used poison gas against its own citizens?

Mr. Waldegrave: The latter decision has not yet been taken. I hope that the House will recognise the difficulty of the former very emotive decision. Equipping the armed forces of a state for fighting with chemical weapons is dangerous and difficult. We, as the principal sponsor of efforts to achieve a worldwide ban on chemical weapons, must be very careful about that. The application that was informally submitted was not simply for children. If such an application was clearly only for civilian and defensive use, we would consider it very carefully. The House would be the first to criticise us if we were seen to be equipping armed forces for chemical warfare.

Mr. Kaufman: Will the Minister of State join me and my hon. Friends in sending sympathy to the relatives of all who were killed in the bus outrage last week and to the relatives of the Palestinians who are being killed every day in the occupied territories? Does he agree that those sterile, pointless and tragic deaths will continue as long as there is no settlement in the middle east and that instead of putting pressure on the Israeli Labour party to remain members of a Government who are going back on what he agrees was a minimal but perhaps helpful commitment, the United States Secretary of State should be putting pressure on the Likud to go to the conference table? It is unacceptable that one bigoted faction should stand in the way of ending this terrible confrontation.

Mr. Waldegrave: I gladly associate myself with what the right hon. Gentleman said, as I am sure do my right hon. and hon. Friends. I have been trying not yet to despair of the Israeli Government's position as I hope that there are people in Likud who will take a wiser view and prevent the Israeli Government from drawing back from an already minimalist position.
Will the House and the right hon. Gentleman forgive me if I ask him to join me in sending one other condolence which is relevant today—to the McCarthy family and other friends of John McCarthy on the death of Mrs. Sheila McCarthy, the mother of the British journalist held in Lebanon? The heartlessness of his captors in the face of his mother's appeals to be reunited with her son before she died can invite only universal condemnation. Obviously, we continue to make every effort to secure his release. We beg those who are in a position of influence to help with that release to do so unconditionally. We recognise that the break in relations with Iran, which was not of our making, has made the task more difficult, but we hope that


the new leadership in Iran will be willing to help in that task. These people are high on our agenda and are not forgotten.

Gibraltar

Mr. Colvin: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the application of European Economic Community directives to Gibraltar.

Mrs. Chalker: All European Community directives apply to Gibraltar except those in areas from which Gibraltar was excluded in the arrangements for United Kingdom accession; those from which Gibraltar is specifically excluded; and those whose subject matter is clearly of no relevance to Gibraltar.

Mr. Colvin: Because of the heavy impact of European Community decisions and laws on the people of Gibraltar, no territory would have had a better turn-out in the recent elections to the European Parliament had those people been entitled to vote. The six Members of the European Parliament from Luxembourg represent, on average, 35,000 voters. Does my right hon. Friend agree that on that basis, Gibraltar could have one MEP in the European Parliament?

Mr. Foulkes: Another Labour Member.

Mr. Colvin: Perhaps, but so what? Will my right hon. Friend use her best endeavours to secure for the people of Gibraltar the representation in the European Parliament that they deserve and require?

Mrs. Chalker: There is no comparison between Luxembourg, which is an independent state, and Gibraltar, which is not. The interests of the people of Gibraltar have been well represented in the Community by Her Majesty's Government and in the European Parliament by the group of United Kingdom MEPs known as the Gibraltar and Europe representation group. They have served the interests of Gibraltar well, and I know that they will go on doing so. I refer my hon. Friend to the observations on this matter that my right hon. Friend the Home Secretary made on 20 June 1984. They still stand.

Mr. Dalyell: Have British Ministers any reason to disbelieve the claim by the Spanish authorities that the IRA team had six members, not three as claimed? This is the same question that I put yesterday to the Ministry of Defence.

Mrs. Chalker: I do not believe that there is any validity in what the hon. Gentleman has said.

Greece

Mr. Cash: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Her Majesty's Government's relations with the Greek Government following that country's general election results.

Mrs. Chalker: We wish the new Greek Government well and look forward to working with them both in the Community and in the Alliance.

Mr. Cash: I endorse what my right hon. Friend has said. Does she recall that it was the former Greek Government who introduced the social charter into the cauldron of European politics? Will she encourage the new Greek Government to adopt a slightly less abrasive approach?

Mrs. Chalker: I am well aware that my hon. Friend shares my view about the proposals that may have been drawn up by the Greek commissioner. The proposals that came forward for the social charter were agreed by a majority of commissioners and are Commission proposals. Discussion on this matter is taking place in Brussels. However attractive the idea may seem, the change of Government in Greece does not affect the position of the commissioner responsible.

Mr. Dykes: There is a certain amount of puzzlement in Athens because, when it comes to social charter provisions, the differences between countries and traditions are too great to make any similarity possible whereas in respect of the internal market, for economic and financial reasons, it is possible for us to achieve total harmony within a few years. Why is there a difference in the British Government's attitude to those two aspects?

Mrs. Chalker: As my right hon. and learned Friend said earlier, the difference is that we believe that the social dimension should help to improve economic performance across Europe. It is clear that the Council of Europe social charter, which provided a framework, was a very good text, but it did not extend to deciding at European level those matters that we properly believe should be decided by each nation state. We know that liberalisation and deregulation are the only way to achieve economic growth and a reduction in unemployment. We believe that we should be entitled, in accordance with the Commission's principle of subsidiarity, to decide which way the country goes.

Afghanistan

Mr. Ron Brown: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about relations with Afghanistan.

Sir Geoffrey Howe: We have no substantive dealings with the Kabul regime, which has been rejected by a majority of the Afghan people. We look forward to the day when the regime is replaced by a truly representative Government with whom we could have normal relations.

Mr. Brown: Surely the Secretary of State has to come to terms with the fact, however unpalatable, that Dr. Najibullah's Government have survived, strengthened their position and defeated the forces of reaction militarily. Even Conservative Members have to come to terms with that. It is suggested by many, and even by moderate rebel leaders, that there should be some understanding and means of negotiation so that this so-called Afghan problem can be resolved. Will the Secretary of State take the initiative and arrange a conference so that the various warring parties can come round the table and reach a settlement which will mean peace in Afghanistan, which is so important to everyone?

Sir Geoffrey Howe: The force that destroyed peace in Afghanistan 10 years ago was the invading Soviet army.


The Najibullah regime was installed and armed by the Russians and was upheld against the wishes of the majority of the Afghan people. It controls less than one fifth of the country and its so-called reconciliation policy has failed. I prefer to accept the judgment of the 5 million Afghan refugees who have still fled the country and decline to return there to that of the hon. Gentleman.

Mr. Greg Knight: Did my right hon. and learned Friend take the opportunity recently of thanking Mrs. Bhutto and her country for all the help and support they have given to the people of Afghanistan over the past 10 years? Those people are still suffering the backlash of Soviet occupation.

Sir Geoffrey Howe: My right hon. Friend the Prime Minister and I took that opportunity. The people and Government of Pakistan have borne a heavy load throughout that time and are much to be thanked by the world community and the people of Afghanistan.

Mr. Anderson: Is not the reality that the heady forecasts of a quick victory for the mujaheddin of perhaps six months or so ago are no longer valid and there is no realistic chance of a military solution to the internal conflict? The reported decision of the United States Administration to finance one more fighting season is wrong. It will increase the fatalities in that war-ravaged area. Will the Government, therefore, have the courage to say to the United States that the decision to finance one more fighting season is wrong and will they urge negotiations as the only basis for future stability in that country?

Sir Geoffrey Howe: The wish on which everyone is united is the emergence of a Government representative of the people of Afghanistan as a whole and that means a Government to whom the 5 million refugees can safely return, not the Government being sustained by the support of Soviet arms. The hon. Gentleman must recall that before the Russian withdrawal, massive quantities of Soviet arms were entrusted to the Najibullah regime and those supplies have continued in large quantities until today.

Hungary

Mr. Harry Greenway: To ask the Secretary of State for Foreign and Commonwealth Affairs when he last met representatives of the Hungarian Government; what matters were discussed; and if he will make a statement.

Mr. Waldegrave: My right hon. and learned Friend met Hungarian State Minister Imre Pozsgay on 25 April. I have just returned from a three-day visit to Hungary where I met Prime Minister Nemeth, Mr. Pozsgay and a wide range of Government, party and Opposition leaders. I also laid a wreath at the grave of Imry Nagy and placed flowers at the memorial to Raoul Wallenberg. I expressed the strong support of the Government, and I believe the House, for the process of reform taking place in Hungary.

Mr. Greenway: Is my right hon. and learned Friend aware that I had the honour to teach many children driven from Hungary at the time of the invasion by Russian tanks? They were very fine children and their parents came with them. Many others were driven out by the murderous regime of Jánós Kádar. My right hon. and learned Friend has the support of all parties in welcoming the

improvements in Hungary. However, will he assure the House that the developments in Hungary will be to the advancement of the people of that nation in a truly democratic form and to the elimination of the past wickednesses they have suffered?

Mr. Waldegrave: Progress is very marked, and there is free and open discussion of all the issues that my hon. Friend mentioned, including the past and the rehabilitation of Imre Nagy. The reburial on 16 June was truly a watershed. I do not think, however, that any hon. Member should underestimate the deep suspicion with which people in the opposition groups in Hungary view even the most liberal members of the Hungarian Socialist Workers' party which was responsible for those previous regimes.

Mr. Heifer: Is the Minister aware that those Opposition Members who stood four square behind the people of Hungary during the revolution in support of attempts to create a society which was genuinely democratic very much welcome what has been happening in Hungary recently? Is he also aware, however, that some of us feel even today how regrettable it was that we in this country could not give our full attention and support to the people of Hungary because the Government of the time were involved in a silly business—Suez.

Mr. Waldegrave: I am not sure that I can reopen the question of Suez. I am sure that there will be quite a lot of agreement on both sides of the House about that. Having said that, I welcome the hon. Gentleman's powerful support for what is happening in Hungary and above all for the openness with which the truth is being told about 1956 and the years after 1956. The memorial to Imre Nagy is not the only moving sight in that graveyard. One also sees monuments to unknown people, many of whom were executed up to five years later, and the truth is at last being told about that.

Mr. Michael Marshall: Does my hon. Friend agree that, in addition to the ministerial contacts that he described, which I greatly welcome, opportunities are, increasingly presenting themselves for British and Hungarian industries to get together to consider opportunities for inward investment in Hungary as a way of assisting the growth of its economy? Is that a task in which the Government could take an interest and involve themselves?

Mr. Waldegrave: We have an investment protection agreement with Hungary, which is very welcome. I am glad to see the United States catching up with Britain in some respects, and we welcome what the President has announced, although I am happy to say that some of the arrangements were already in place. Hungary has never rescheduled her debts and deserves a proper response from Western investment now that she is welcoming it, although we believe that there is still a long way to go in opening up a market economy, as one would expect after 40 years of Communist nightmare.

Mr. Alex Carlile: Does the Minister agree that Hungary is as much a country of central Europe as Austria is? Will the Government take steps to ensure that the European Community regards Hungary in much the same light as Austria, though needing very much more help to assist it towards economic and democratic success?

Mr. Waldegrave: I know that the hon. and learned Gentleman, who has considerable knowledge of these matters, welcomes the fact that the European Community has a very good agreement with Hungary, and I am glad that the Government played some part in carrying that through. It is true that Hungary is a European country and part of European culture, as my right hon. Friend the Prime Minister said resoundingly in her speech at Bruges.

Sir Eldon Griffiths: As one who stood alongside Imre Nagy in 1956 when he proclaimed a new deal for Hungary, and who ended up a prisoner of the Red army for my pains, let me ask my hon. Friend whether he regards the rehabilitation of Imre Nagy and the movement of Hungary back towards freedom as one of the remarkable historical changes that we have witnessed in recent years? Is it not true, as the hon. and learned Member for Montgomery (Mr. Carlisle) suggested, that we should now be trying to open the door for Hungary to become associated in some way with such western organisations as the Council of Europe and, eventually, the EEC?

Mr. Waldegrave: Hungary does have guest membership—observer status—at the Council of Europe, and that is a good thing. I support what my hon. Friend says. I hope that it means exactly what it says. In his speech to the Council of Europe Mr. Gorbachev said that countries were allowed to choose their own paths. If Hungary is allowed to choose its own path, we know which it will be.

China

Mr. John Hughes: To ask the Secretary of State for Foreign and Commonwealth Affairs what representations he has been making to the Government of China on the subject of human rights.

Sir Geoffrey Howe: We and our European Community partners have firmly condemned the brutal actions of the Chinese Government. I made this plain to the Chinese chargé d'affaires on 5 June. On 27 June the European Council adopted a declaration on China, which reiterated our condemnation and called on the Chinese authorities to respect human rights. In accordance with this declaration, ambassadors representing the Twelve have been instructed to seek the admission of independent observers to attend trials and visit prisons.

Mr. Hughes: In the light of other countries restricting their trade with China, will the Foreign Secretary say whether the 48 group, which includes BOC, Plessey and Pilkington, is still going ahead with its massive trade mission in November? Are the Government giving that trade mission their blessing? If they are, how can they justify the use of Department of Trade and Industry funds to subsidise it, only a month after the Tiananmen square massacre, and when executions are still taking place and human rights are being abused? Are the Government adopting a mercenary manner by ignoring those horrendous happenings and saying that business will go ahead as usual?

Sir Geoffrey Howe: As I have told the hon. Gentleman, the Government, in common with all Governments of the world, have in no uncertain fashion expressed their horror at what has taken place. Equally, Her Majesty's Government, in common with all Governments of the Economic Community and of the economic seven—not

least that of Hong Kong, strongly urged by the people of Hong Kong—do not believe that it would be right to impose economic sanctions in our relationships with China. I have no doubt about that. Every other Government take the same view. Of course we have postponed consideration of concessional financing for new projects, and of course we are looking carefully at any particular case involving DTI support for trade missions. It is for that reason that the Sino-British trade council announced on 7 July its postponement of the all-British exhibition scheduled for November. The DTI is still in consultation with the 48 group to which the hon. Gentleman referred about its plans to mount a mission to China in the autumn.

Sir Peter Blaker: Is it not in the interests of China to take early steps to restore the people of Hong Kong's confidence in the future of their rights, for example by agreeing that the People's Liberation Army will not be stationed in Hong Kong after 1997 and that the right of interpretation of the Basic Law shall rest unambiguously in Hong Kong?

Sir Geoffrey Howe: My right hon. Friend has drawn attention to two articles of the draft Basic Law which were most frequently pressed upon me on my recent visit to Hong Kong. On each of those matters I have already expressed a view which my right hon. Friend has just now expressed.

Mr. Mullin: May I say how much many Opposition Members welcome the Government's rediscovery of human rights in China and hope that they will now extend to Tibet? Who knows, when the Dalai Lama of Tibet next comes to London, perhaps the Foreign Secretary will find time to meet him.

Sir Geoffrey Howe: The scale of events in Tibet and of those in Peking recently were completely different. In any event, at the time of the last tragedies in Tibet, Her Majesty's Government made clear their deep concern about what was happening there. As the hon. Member knows, the Dalai Lama did, indeed, come to London.

Mr. Adley: As one of the purposes of maintaining diplomatic relations is to pass to Governments messages that sometimes have to be passed, however unpleasant they may be, will my right hon. Friend, through whatever channel is open to him, convey a message to the Chinese Government, advising them against seeking to influence opinion in western Europe with a propaganda booklet entitled "The June Turbulence in Beijing"? That booklet is unlikely to win them friends, change any minds in the West, or to gain them any respect.

Sir Geoffrey Howe: I am grateful to my hon. Friend for drawing my attention to the book, which I have not yet studied. I shall certainly do so in the light of his advice. He is no doubt well placed to convey similar advice to the Chinese Government.

Mr. Foulkes: Does the information that the Foreign Secretary gets from missions in China confirm the information that I received today that the purge and repression is much worse than is reported in the western media, and that in the past few weeks, thousands of students have been rounded up in Szechwan province?
Is the Foreign Secretary aware that trade visits and all other contacts are being ruthlessly exploited by the


Chinese Government for propaganda purposes? For both those reasons, will he say that the 48 group's October visit must be cancelled, like the Sino-British trade exhibition? Does he accept that we have a moral responsibility to the demonstrators, to whom we gave our encouragement, to stand by them until all the repression is ended in China?

Sir Geoffrey Howe: Nobody doubts the importance of the moral message that the hon. Gentleman is uttering. The entire collection of western Governments has expressed that very strongly. The fact must be faced that Hong Kong, for which the right hon. Member for Manchester, Gorton (Mr. Kaufman) claims some responsibility, is intimately dependent, economically and politically, upon what takes place in China. The advice of people in Hong Kong, which is upheld by Governments around the world, is that it would not be helpful to the advancement of the cause of respect for human rights in China to rupture economic links with them.

Mr. Kaufman: Shoddy.

Sir Geoffrey Howe: It may be shoddy in the right hon. Gentleman's judgment, but it is the universal judgment of all the countries with whom we have been in consultation.

Mr. Bill Walker: Does my right hon. and learned Friend find it a fascinating contradiction that the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) did not take the same view about the Falklands? Does he agree that we have to face the fact that Hong Kong exists, that we have responsibilities, that we have a very short period in which to ensure the survival of the way of life of Hong Kong, and that that can be achieved only by working with and talking to the Chinese?

Sir Geoffrey Howe: Our responsibility to the people of Hong Kong can and should be achieved by making it absolutely plain to the Government of China how shocked we and the rest of the world were by what took place in Peking six weeks ago, and by seeking at the same time a change, including the method of change. We also seek the continuity of economic relations between Hong Kong and China. That is the view not just of this Government, but of all the Governments of the European Community and of all the substantial trading partners.

Hong Kong

Mr. McFall: To ask the Secretary of State for Foreign and Commonwealth Affairs what proposals he has to encourage the transition to democracy in Hong Kong.

Sir Geoffrey Howe: As I told the House on 5 July, we shall be re-examining current plans for the development of representative government in Hong Kong. As the Select Committee on Foreign Affairs pointed out in its report published on 30 June, the wishes of the Hong Kong people themselves must be crucial to our approach to this question.

Mr. McFall: In the light of the Foreign Affairs Select Committee report on Hong Kong and of the official opposition view that, by 1991, 50 per cent. of the Legislative Council should be elected and that by 1995, 100 per cent. should be elected, what is the view of the

Government on these proposals and, more particularly, will they implement them so that, before the handover date of 1997, full democracy is operating in Hong Kong?

Sir Geoffrey Howe: We shall, as I have made clear already, review the rate of progress toward representative government in Hong Kong in the light, above all, of evolving opinion in the territory. The Select Committee on Foreign Affairs pointed out—I have already made this point—that the wishes of the Hong Kong people must be crucial to our approach to this question. The last considered opinion expressed in Hong Kong was that expressed unanimously by the Office of the Members of the Executive and Legislative Councils of Hong Kong on 24 May. It is now reconsidering the matter. It is already clear, as I have made plain, that plans for 1991 will certainly need to be looked at again. We shall consider what needs to be done before 1997 once those views have been expressed clearly within Hong Kong.

Mr. David Howell: Does my right hon. and learned Friend accept that he is absolutely correct that it is the wishes of Hong Kong about the pace of democracy which must prevail, although, as he rightly says, there are signs of increasing strength of feeling about the need to have democracy well entrenched by 1997? Will he try to explain to Opposition Members and to those outside this House, when they talk of economic sanctions and other attempts to break links with China, that 40 per cent. of Hong Kong's manufacturing industry is physically placed up the Pearl river in China? The ideas of Opposition Members would put a dagger at the heart of Hong Kong.

Sir Geoffrey Howe: I am grateful to my right hon. Friend for both his comments. It cannot be stated too often that China is the largest commercial and financial partner of Hong Kong and that Hong Kong is the largest commercial and financial partner of China. It would be absolutely catastrophic to begin to approach this matter by deliberately savaging those crucial and important economic links.

Dr. Bray: Does the Foreign Secretary agree that there is a job to be done by a directly-elected democratic executive and legislature in Hong Kong in securing rights of refuge and settlement of abode—or however he cares to describe it—for larger numbers of people in the world than the Foreign Secretary or any British Government would have the moral authority to secure? Has he therefore made arrangements to receive advice individually from members of LegCo and ExCo, and not solely through the Government?

Sir Geoffrey Howe: The members of LegCo and of OmelCo—the Office of the Members of the Executive and Legislative Councils of Hong Kong—are well placed to extend their advice individually as well as collectively. I had the opportunity of meeting them together when I was there and each expressed strong views. I have no doubt that we shall subsequently hear from them individually as well as collectively.

Mr. Kilfedder: Will the Foreign Secretary give an assurance that the people of Hong Kong will be allowed to draft and approve a Bill of Rights and when that has been achieved, will he persuade his Cabinet colleagues to provide a similar Bill of Rights for the people of Northern Ireland?

Sir Geoffrey Howe: I would not seek to match my hon. Friend in his willingness to seek to address the questions and aspirations of the people of Northern Ireland. However, he can be sure that we intend to introduce a Bill of Rights at an early stage in Hong Kong. Indeed, the Governor will be making an announcement about that in October.

Totalitarian Regimes

Mr. Boswell: To ask the Secretary of State for Foreign and Commonwealth Affairs what training in the technical processes of democracy Britain can offer to countries emerging from totalitarian regimes.

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Tim Eggar): We offer training in the technical processes of democracy through a wide range of visits, seminars, legal exchanges, and media and management training courses.

Mr. Boswell: Does my hon. Friend agree that the cause of democracy is now advancing widely throughout the world, especially in eastern Europe? While I pay tribute to our hon. Friend the Under-Secretary of State for his offer to Poland—and, I believe, to Hungary—of support of that kind, does my hon. Friend agree that it is entirely appropriate that the Government should add a measure of cash and training resources to complement our skills, strengths of tradition and knowledge in the processes of democracy?

Mr. Eggar: I am grateful to my hon. Friend for his recognition of the £5 million know-how fund for Poland. In addition, the Great Britain-Eastern Europe Centre is planning a series of seminars on democracy. We also receive and respond to a wide variety of requests for help in this area from emergent democracies throughout the world.

Mr. Winnick: Can we take it from the Minister's reply that the large majority of the people in South Africa, and people in Chile, Guatemala and other Right-wing dictatorships will also receive all the kinds of assistance that the Minister has just explained, as they move, we hope, from dictatorships to democracy?

Mr. Eggar: The hon. Gentleman is aware that as part of a long-standing policy, supported by Governments of both parties, we have brought over many of the democratic opposition candidates and that we have assisted with visits by parliamentarians, especially to Chile. That will continue. There is a good case for examining whether there is any more that we can do in that area, right across the board.

Drugs

Mrs. Maureen Hicks: To ask the Secretary of State for Foreign and Commonwealth Affairs what progress is being made on negotiated reciprocal arrangements with other European Community members to combat drugs.

Mr. Eggar: On 26 June my right hon. and learned Friend signed a bilateral agreement with Spain to trace, freeze and confiscate the assets of drug traffickers and combat the misuse of drugs. We are currently in active discussion with four other European Community countries with a view to signing similar agreements.

Mrs. Hicks: In congratulating my right hon. and hon. Friends on the recent agreement that has been signed with Spain, and in view of the fact that this is only the first agreement with one of our partners since the introduction of the Drug Trafficking Offences Act 1986, may I ask whether he is convinced that our European partners recognise the urgency of the escalating problem now facing us and that they are ensuring that Latin-American drug traffickers are not using Europe as a distribution centre and as the front door to the United Kingdom?

Mr. Eggar: We must accept the fact that Europe as a whole is being targeted by the cocaine barons and, as part of Europe, we face a considerable threat both from crack and from cocaine. I have no doubt about our Community partners' commitment to fighting the menace from drugs. It is, however, a difficult technical matter to reach agreement with countries that have a different kind of legal system to ours. We are working hard at it, and I am hopeful that we will soon be able to sign further agreements.

Mr. Cryer: Is it true that the number of seizures of drugs at United Kingdom borders by Customs officers exceeds the number of seizures by every other EEC state? If so, will the Minister assure the House that borders will not be dismantled after 1992, but that we will still maintain scrutiny, against, for example, drug merchants and terrorists, to ensure that traffickers are stopped? Otherwise, the Minister could be accused of subordinating the interests of United Kingdom citizens to the interests of the multinationals.

Mr. Eggar: I understand the hon. Gentleman's concern. It is, of course, essential that we maintain the ability to impose frontier controls after 1992 for the reason that he has given and for other reasons too.

Community Care

The Secretary of State for Health (Mr. Kenneth Clarke): With permission, Mr. Speaker, I wish to make a statement on the Government's proposals for the future organisation and funding of community care. I apologise for the fact that I have a fairly lengthy statement to make, but it is a complex matter which is difficult to abbreviate more than I have.
Community care is a policy to which successive Governments have been committed for almost 30 years. The key aim of the policy is to enable people to live as full and independent a life as is possible for them to do in the community for so long as they wish to do so. For many people, that means providing the services and support that they need to continue to live in reasonable comfort in their own homes for as long as possible. For others, who may have experienced long stays in hospital and have more intensive care needs, it means helping them to re-establish their lives away from large institutional settings. I am sure that the vast majority of people wish to live in or near their own homes until or unless age or disability make that impossible. It is the Government's purpose to help them and the people who care for them to achieve that aim. Success depends crucially on the availability of adequate services in the community.
The background to the developments that I am about to announce is one of tremendous growth in both resources and manpower for community care. To give the House some examples of the progress that has been made between 1979–80 and 1986–87—expenditure by the NHS on the community health services has risen by 40 per cent. in real terms and local government spending on the personal social services has grown by almost 27 per cent. Indeed, that local government figure is almost 39 per cent., if it is brought up to date.
The number of day centre and day hospital places for mentally handicapped people between 1979 and 1987 rose by 10,000. The number of home helps grew by 20 per cent. and the number of day centre places for elderly people by 18 per cent. The number of residential places for mentally ill people rose by more than a half, and places in day centres and day hospitals by a third. Between 1981 and 1986, the number of community psychiatric nurses doubled.
That growth in resources has been taking place alongside a dramatic change in the delivery of care and the movement of people out of hospitals and into community settings. Between 1980 and 1986, the number of children in mental handicap hospitals fell from 2,500 to fewer than 400, and the number of mentally handicapped adults in hospital fell by around 14,000, while the number in local authority, voluntary and private community based homes rose by 11,000. In additional, we have, through the benefit system, put huge additional resources into supporting people in private residential care and nursing homes. The amounts spent on supporting these people have increased from £10 million in 1979 to £878 million in 1988.
None the less, I am sure that we all agree that progress has not been as even or as rapid as we should like. The rapid growth of residential and nursing home care has been unplanned and largely based on the availability of social security benefits. The Government recognised the need to see whether the arrangements for delivering

community care could be improved when we askd Sir Roy Griffiths in December 1986 to report on ways by which the better use of public funds for community care might be achieved.
We are indebted to Sir Roy for his report entitled "Community Care: Agenda for Action", which we published in March last year. The report has succeeded in stimulating valuable public debate. More than 280 organisations, professional bodies and members of the public, have sent us their varying views on it, many in support of the recommendations, but some favouring other options. We have taken full account of the wide range of views expressed, and considered a wide variety of options. Our conclusions are as follows.
We accept the distinction Sir Roy Griffiths makes between health and social care. Our proposals do not alter the functions or responsibilities of health services. The community health services will continue to play an essential part in meeting the medical and nursing needs of people outside hospital.
We are proposing to make important changes in the way in which non-health care is provided and, where necessary, funded at public expense. The great bulk of community care will continue, as now, to be provided by family, friends and neighbours. The majority of carers take on those responsibilities willingly, and I admire the dedicated and self-sacrificing way in which so many members of the public take on serious obligations to help care for elderly or disabled relatives and friends. Our proposals are aimed at strengthening support for those many unselfish people who care for people in need.
At present, people who are unable to support themselves and need help with social care can look to two separate sources of statutory help: to social security offices for payments towards the cost of places in residential care and nursing homes; and to local authorities, for home care, day care and residential care services. We accept that these present arrangements are flawed, because they cannot ensure that priority is given towards supporting people at home where that is possible or desirable.
Social security payments for residential and nursing home care are subject to no assessment of individual needs for care. The public agencies have a financial incentive at the moment which no one ever intended to give to them, to rely as much as possible on the availability of social security for residential care. We do not believe that those present arrangements secure the best possible outcomes for people in need, or indeed, the best possible use of taxpayers' money.
We therefore accept Sir Roy's recommendation that those two sources of public funding should be brought together and allocated on the basis of a proper judgment of each individual's needs. By creating this unified source of funding for the full range of social care services, we can ensure that the objective of sustaining people in their own homes wherever possible be given the necessary priority.
We propose to introduce a new funding structure for those seeking help from public funds for the cost of care. In future there should be a single budget to cover the costs of care whether in a person's own home or in a residential or nursing home. This will enable sensible decisions to be taken about the type of care that best meets an individual's needs and provides best use of public money. At the same time we will remove the perverse incentives in the present benefit system by making all claimants eligible to income


support and housing benefit on a similar basis, whether they are living in their own homes or in independent residential or nursing homes.
We have considered carefully which care authority should hold this new budget and take on the responsibility for the assessment of need and provision of care. Local authorities are already responsible for the full range of social care services and have a great deal of expertise in this area. We have concluded that the best way forward will be to build on local authorities' existing responsibilities. We accept Sir Roy Griffiths's proposal that local authorities should assume responsibility for the care element of public support for people in private and voluntary residential care and nursing homes, and for making the best use of those funds in relation to an assessment of people's individual needs and wishes. Collaboration between medical, nursing and social services agencies will be essential in assessing individual needs, and in designing suitable arrangements for care. We shall look to local authorities to ensure that suitable multidisciplinary assessment procedures are in place and to health authorities to make their contribution to those procedures.
We attach great importance to securing a smooth transition to this new structure, avoiding uncertainty for people currently living in homes and for their relatives. We therefore propose that the new arrangements for social security benefit entitlement will apply to people not already in residential or nursing home care after the date on which the new arrangements come into force.
Residents of homes who are in receipt of income support when the new system is introduced will therefore retain their entitlement to help through the existing system. People who are self-financing residents of registered homes when the new system is introduced will also be able to apply for income support under the existing arrangements if their funds become exhausted subsequently. My right hon. Friend the Secretary of State for Social Security is today announcing further details of these new arrangements.
We accept that further efforts will be needed to improve co-ordination between health and social services in the arrangement and delivery of services to individuals. We believe that the clarification of roles in our proposals will make it easier to achieve this.
The local authorities' responsibilities, in collaboration with others including doctors and other caring professions, will be to assess individuals' needs, design suitable care arrangements, and secure their delivery. It is not necessary for local authorities to provide all this service directly themselves and they should make maximum possible use of the voluntary, not-for-profit and commercial sectors so as to widen individuals' room for choice, increase the flexibility of services and stimulate innovation.
The Government have long urged local authority social services departments to act in an "enabling", and not just a "providing" capacity. Some authorities are already moving in that direction. To minimise disruption and to ensure that local authorities have every incentive to make use of the independent sector and offer people choice, we propose that they should continue to meet the full cost of accommodating people in local authorities' own homes, subject to their existing powers to make charges according to residents' ability to pay. My right hon. Friend is not therefore proposing to change the benefit rules for residents of these homes.
We believe that these new financial arrangements will give local authorities the necessary incentives to develop better services for people at home, and make greater use of independent providers. But it will be important that local authorities should have clear plans for the development of community care services, worked out in collaboration with health authorities and the independent sector. I shall expect all authorities to have such plans, and shall ensure that they are open to inspection by my social services inspectorate. I also propose to take powers to call for reports on local authorities' community care services.
Local authorities will need adequate resources for their new responsibilities. That means that we shall transfer to the local authorities the resources which the Government would otherwise have provided to finance care through social security payments to people in residential and nursing homes. The aggregate amount of transferred resources will allow for the projected growth in the number of people needing support. Resources will be needed by the local authorities in addition to carry out their new tasks of assessing individuals' needs, arranging appropriate care services for people at home, and buying residential and nursing home care.
We are confident that the proposed funding changes, by putting more emphasis on supporting people in their own homes, will provide both more suitable services closer to individuals' wishes and needs, and better value for money from public spending than under the existing arrangements. We shall be discussing the detailed financial implications with local authority representatives. The necessary decisions on the resources to be transferred will be taken in the public expenditure survey next year.
I have summarised our conclusions on the main proposals in Sir Roy Griffiths's report. They represent a major challenge for local authorities and social services departments. There are a number of associated issues on which the House will also expect me to make the Government's position clear.
First, we have been especially concerned to ensure that care for severely mentally ill people is properly managed. Here, as in other areas, we have concluded that the right course is to ensure that the existing responsibilities are discharged effectively. On the health side, I will ensure that discharges of seriously mentally ill people from hospital will take place only when adequate medical and social care is available for them outside hospital. More details of the initiatives we are taking here will be announced shortly. On the social care side, we have decided to create a new specific grant directed at encouraging local authorities to make their necessary contribution to services, in line with health authority plans and objectives. To achieve that, we have decided that the grant should be payable by health authorities, acting as my agents, on the basis of plans and targets put to them by the relevant local authorities. The details of this proposal will be worked out in discussion with health and local authority representatives.
Secondly, both Sir Roy Griffiths and Lady Wagner made recommendations about the registration and inspection of residential care and nursing homes. Local authorities will be asked to establish inspection and registration units, at arm's length from the management of their own services, which should be responsible for checking on standards in their own homes, and to involve independent outsiders in these arrangements. We have concluded that, for the present, existing statutory functions should remain unaltered.
Thirdly, we would expect general practitioners to ensure that social services departments are aware of their patients' needs for social care as recommended by Sir Roy Griffiths in his report.
I have outlined our conclusions on the main issues. I am grateful to the House for its patience in sitting through a long and complicated statement. My right hon. and learned Friend the Secretary of State for Scotland and my right hon. Friend the Secretary of State for Wales are today announcing separately our conclusions of particular relevance to them. My right hon. Friend the Secretary of State for Northern Ireland will be doing the same early next week. We propose to spell out our proposals in more detail in a White Paper that we aim to publish in the autumn. It will be necessary to ensure that the necessary legislative framework is in place before implementation, which we propose should be in 1991.
Our proposals bring the policy of community care up to date, and will improve the way in which it is put into practice on the ground. Community care is no longer primarily about providing the alternative to long-stay hospital care. The vast majority of people needing care now have never been, nor expect to be, in such institutions. The policy aim now is to strike the right balance between home and day care on the one hand, and residential and nursing home care on the other, while reserving hospital care for those whose needs truly cannot be met elsewhere. The changes we propose will for the first time ensure that all public moneys are devoted to the primary objective of supporting people at home wherever possible. They provide a solid basis for the future, and are founded upon the principles of preserving individual independence and freedom of choice and of providing services in a sensitive and personal way.
I believe that they deserve whole-hearted support, and commend them to the House.

Mr. Robin Cook: I begin with the two points in his statement on which we can unreservedly congratulate the Secretary of State. First, we welcome the fact that he has finally got round to saying anything about the Griffiths report. Will he confirm that Ministers have taken longer to think about their response to this report than Sir Roy took to write it? Even after all that time, the Secretary of State still has to ask the House to wait another four months for a White Paper to explain the meaning of today's statement.
Secondly, I congratulate the Secretary of State on persuading the Prime Minister that providing community care means swallowing her distaste for local government. This is a major achievement, which deserves full recognition. We welcome the Secretary of State's acceptance of Griffiths's central conclusion that the lead agency in community care must be the local authority, which belongs and is accountable to the community.
Why, then, has the right hon. and learned Gentleman rejected Griffiths's recommendation that residents of local authority homes should be entitled to the same financial support from central Government as residents in private homes? If he really believes that elderly people should be given the widest possible choice, why has he decided to deny them income support and housing benefit only if they choose a council home? Surely even the Secretary of State

will admit that, rather than widening choice, that narrows it, and does so simply to fit the Government's prejudice against local authorities.
Since the statement calls for greater co-ordination and collaboration between health authorities and local authorities, could the Secretary of State enlighten the House as to how that co-ordination and collaboration will be helped by his intention to boot council representatives off every health authority?
The Secretary of State was good enough to recognise that most care in the community will continue to be provided by family and friends. Does he not mean by that the nearest available female relative, often exhausted by providing constant nursing, with no training, with no break and usually with no help? The Secretary of State informed the House that he admires them. If he really admires them, why does the statement contain no mention of respite care to give them a break, or a single mention of care attendents to give them a night off? If he really admires them, why have the Government proposed to slap on an extra poll tax charge for taking in granny? If he really admires them, why does he not bring back national guidelines for home helps? What has he to say to the half-dozen councils—all Conservative—whose provision of home helps is half the national average? Is that the standard of community care that is acceptable to the Conservative party?
The Secretary of State said that services should be sensitive to the needs and wishes of users. What will he do to encourage that? Will he begin by telling his colleagues on Bradford council not to proceed next Wednesday with the sale of a dozen old folks' homes without consulting the residents? Is that the sensitivity to the wishes of users that is acceptable to the Conservative party?
Now that we have persuaded the right hon. and learned Gentleman to use the words "community care", could I tempt him to use the words "disabled persons Act"? Why did he not take this opportunity to implement section 7 of the Disabled Persons (Services, Consultation and Representation) Act 1986, which would have given patients discharged from mental health hospitals the right to an assessment of their needs? Is he aware that last week was the third anniversary of Royal Assent to that Act? How can he expect the House to believe in the Government's commitment to community care when they have yet to implement half that Act?
The biggest omission from the right hon. and learned Gentleman's statement was money. He knows that Sir Roy Griffiths recommended an annual grant for each local authority to fund its community care programme. Would the right hon. and learned Gentleman like to rummage through his notes in case he left out the passage announcing such a grant? Does he not appreciate that, without resources, the plans and the reports that he has announced today are mere window-dressing? Why does he not at least accept that local authorities should have the property fortunes that health authorities are making from the sale of mental hospitals? Should not the first charge on that money be the capital costs of new homes to house the patients put out so that the hospitals could be closed?
The right hon. and learned Gentleman began with a description of the Government's record on community care that oozed complacency from every sentence. It ignored the fact that the number of places at day centres for the elderly has fallen per thousand of the elderly population. It ignored the fact that the numbers


discharged from mental health hospitals are three times the growth in the number of day centre places. Those outside this place will ask how that description could be made by anyone who has noticed the dramatic growth in the number of mental health patients now living in hostels for the homeless, or the steady rise in the number of them in remand centres, or even the increase in the number sleeping rough behind the right hon. and learned Gentleman's ministerial office.
The right hon. and learned Gentleman ended his statement by informing the House that his proposals will not be in place for another two years. Our pledge to those in need of community care is that, by then, no longer will he and his Government be in power.

Mr. Clarke: The hon. Member for Livingston (Mr. Cook) began by talking about the time that it has taken to produce our response. I cannot win on timing. For anything of which he disapproves, he accuses me of being too fast and a bull at a gate; for anything of which he approves—despite his attempts to find disagreement—he accuses me of taking too long. It is easy for him; he has only to see the words "local government" in a White Paper to ring NALGO—when it is not on strike—and ask what to say—[AN HON. MEMBER: "That is a poor joke."] It is a very good joke. The hon. Gentleman obviously takes footnotes from NUPE, as was shown by his questions.
The truth is that the hon. Gentleman agrees with my proposals. We have taken considerable care, first in deciding exactly how to sharpen the responsibilities of local authorities; secondly, how to transfer resources to them to enable them to do so; and thirdly, how to ensure that we have some assurances that they will live up to those responsibilities and properly discharge their role. The hon. Gentleman knows that he approves of that policy.
The hon. Gentleman apparently dislikes the fact that we are not allowing a large increase in local authority provision of council homes. Indeed, we are not proposing any change to the existing arrangements for residents of local authority homes, and there is no case to do so. If the hon. Gentleman thinks that there is a need to change the arrangements artificially to stimulate a sudden upsurge in local authority provision, my answer is that my statement is a challenge to local government and gives it important new responsibilities. It probably would not be right for most councils to combine with that a growth in the management role of the day-to-day running of more and more homes. We have struck the right pattern, because more and more local authorities think of themselves as enablers, looking to other people to deliver the care.
The hon. Gentleman made some curious remarks about my reference to relatives and friends. He rightly said that many of them are female members of the family looking after their relatives. The whole point of my statement is that we are enabling local authorities to give more support to those people. The hon. Gentleman gave a list of provisions that they are likely to need, including respite care and care attendants. The whole point of transferring resources and of clarifying responsibilities is to make available the very kind of support that local authorities should be enabled to provide in the light of our policy. The hon. Gentleman's snide remarks were unintelligible to me. I shall not get into bashing Bradford council, which the hon. Gentleman also irrelevantly introduced into his

arguments. New control in Bradford is bringing great improvements to that authority and to its capacity to deliver enhanced care to the city's residents.
Section 7 of the Disabled Persons (Services, Consultation and Representation) Act 1986 is overtaken by my remarks today. Section 7 divides responsibility for mentally ill people between those who have been in hospital for six months or more and those who have not —and there is no logical basis for that arrangement. Of course I agree that care in the community policy for the mentally ill needs to be improved, and our proposal will ensure that pump-priming resources will be available to local authorities.
The key to those resources will be held by health authorities, which, as my agents, will release money when they are satisfied that the right local provisions are in place. That should reduce the number of patients who are rightly released from hospital into better provision, but who then leave that accommodation or become lost, are not followed up, and wind up in the unfortunate circumstances that the hon. Gentleman described.
As to money and resources, we are following Sir Roy Griffiths's recommendation to transfer resources and the care element of social security to local authority budgets —making allowance, as we will have to do, for anticipated growth and the new duties of local authorities. We have not followed Sir Roy's recommendation for a specific grant. The transfer of resources will take place, but the specific grant was a control mechanism suggested by Sir Roy. For my central Government Department to seek to use a specific grant to control directly the community care policies of all local authorities throughout the country would not be the right way of enabling those authorities to discharge their responsibilities.
That is why I prefer the route of community care programmes drawn up together with health authorities and voluntary bodies, of giving powers to my social services inspectorate, and of having the power to call for reports and to intervene when an individual authority poses a problem. The transfer of resources is in line with Sir Roy's recommendation. That transfer and the new responsibilities begin a new era in community care. It has always been right to pursue the policy of keeping people in their own homes for as long as they wish to remain there, and the implementation of that policy will now be greatly improved.

Sir David Price: Is my right hon. and learned Friend aware that the House is grateful to him for acknowledging the role of private carers in looking after the elderly and disabled in our midst? Is he aware also that if those carers decided to take industrial action, the statutory services could not cope? As my right hon. and learned Friend acknowledges the important role of the private carer, will he explain how he intends to "strengthen support" for the private carer? The hon. Member for Livingston (Mr. Cook) made a number of points that pertained directly to that aspect. Do the Government intend to increase the invalid care allowance, which would be of enormous help to people who give up work to look after a person who is insufficiently handicapped to be eligible for a disabled attendance allowance? Is my right hon. and learned Friend aware that there are more people out there needing help than have been acknowledged until now?

Mr. Clarke: I agree with my hon. Friend's final point, and I think that it is acknowledged now that the vast majority of care of the people in question is provided by dedicated friends and relatives. We are trying to tackle the situation of when it becomes increasingly difficult or near impossible for the family to cope. At present, they find it much easier to obtain social security, to enable them to move the relative into a nursing home, than to secure the additional support that might help them to keep that relative at home much longer. I refer to respite care, domestic help and the other provisions that local authorities should be enabled to provide.
The money for that is readily available, but is currently diverting people into residential care when perhaps that is not the best choice. Those resources will be placed in the hands of local authorities, who will use a lot of it to back up the carers and give the support that they require to carry on with their task—which they would do willingly, with the support of the statutory authorities.
There is no change in the benefit arrangement for carers. That matter is for my right hon. Friend the Secretary of State for Social Security and it is not dealt with in the Griffiths report. However, there have been some advances. There has been a huge growth in the number of people receiving invalid care allowance since it was extended to married women, increasing elevenfold after the law was changed three years ago.
We are trying all the time to find other ways of helping carers, and we are encouraging the demonstration projects that are going on all over the country to show local authorities what is best practice in the provison of support.

Mr. Ronnie Fearn: We welcome the statement, and, indeed, the fact that social services departments will now be the lead authority: we have asked for that for a long time in our discussions with Sir Roy Griffiths.
Does the Secretary of State accept, however, that the GPs now have a considerable role to play, and that the GP lists should be smaller? Does he agree that training is needed for social services departments? They have called for it through their directors, and it will certainly be an important aspect of the arrangements.
Hon. Members have already mentioned the role of carers. Can the Secretary of State specify one or two measures to help them? I am connected with the Association of Carers, which will not be too sure, from a reading of the statement, what is to happen. Perhaps the Secretary of State for Social Services could enlighten us.
It appears that there will be rather a dearth of housing for those who are sent out—I will not say "thrown out" —of institutions. Clearly local authorities must play a major role. Will the Secretary of State direct in any way that they should receive more finance for the purpose?

Mr. Clarke: A high proportion of referrals to social services departments—of people in need of community care—come from general practitioners at present, and I accept that GPs have an extremely important role to play. They will be able to perform that role if they take advantage of one of the elements in the new contract: we shall pay them a much higher fee if they carry out an annual social assessment of all their patients over the age of 75.
I agree that small lists will help GPs to carry out their new duties. None of my proposals will increase the average

size of lists; they have been getting smaller ever since the Government came to office, and I confidently expect them to continue to do so.
I agree entirely that we must continue to strengthen training of social workers and local authority employees. Specific grants are already available—for example, to increase the amount of training for social workers caring for the elderly.
I gave some examples to my hon. Friend the Member for Eastleigh (Sir D. Price) a moment ago of the kind of assistance that carers can expect from local authorities, which are being given their new responsibility in the transfer of resources precisely so that they can step in and help people to obtain the support that they require to live in or near their homes.
I note what the hon. Gentleman said about housing, but I honestly do not think that housing finance is remotely related to what I am talking about today, and it is not a matter on which I can announce any new policy.

Dame Jill Knight: I welcome what my right hon. and learned Friend has said about the improvement in the arrangements for the discharge of mental patients, whose plight has been worrying many Conservative Members.
May I ask my right hon. and learned Friend to consider two factors that make it very much more difficult for private residential homes to fulfil their important task? First, patients in such homes are not eligible for ordinary NHS ancillary treatment: that is a serious problem. Secondly, payment to such people to meet their bills is all too often not passed on to the managers of the homes, who are experiencing severe losses.

Mr. Clarke: I am grateful for what my hon. Friend has said about the worrying problem of mentally ill patients, who nowadays are increasingly treated and cared for outside rather than inside hospitals. As I have said, my hon. Friend the Under-Secretary of State for Health will be making a further statement in the form of a written answer tomorrow, setting out more details of our NHS policy towards such patients. Lest anyone should speculate further along the lines of press reports, let me add that that will not include a moratorium on the discharge of patients from hospitals, or anything of that nature. [HON. MEMBERS: "Why not?"] Well, some may want it. It will strengthen the policy of care in the community for those who ought to be cared for in the community and will ensure that the policy works. I am afraid I have forgotten my hon. Friend's other point.

Dame Jill Knight: NHS ancillary medical treatment for patients in private residential homes.

Mr. Clarke: I am grateful to my hon. Friend. In my experience, people who are living in private residential and nursing homes are not deprived of all rights to NHS ancillary care, but I agree that the practice varies widely from place to place. If I may, I shall either write to my hon. Friend or will answer a parliamentary question, if she cares to table one, setting out the basis on which those who live in private homes are entitled to NHS treatment, thus aligning them with other citizens. It is a matter that often gives rise to local worries.
As for my hon. Friend's point about social security, various difficulties can arise when people get social security payments to pay for their stay in a nursing home, including


the fact—particularly when they are first admitted—that large sums of money can sometimes be handed over to someone to pay for the treatment, and owners sometimes say that it does not reach them. I know that my right hon. Friend the Secretary of State for Social Security is aware of that. He will have heard my hon. Friend's points, as he is in his place. I know that he is considering the matter and that he will keep it actively under review.

Mr. Frank Field: I thank the Secretary of State for his statement, but does he not agree that what he has said this afternoon could mean everything or nothing, depending on the level of funding? As for his most welcome statement that people should remain in their own homes or in their children's homes, if that is at all possible, what is the projected increase in expenditure from the total budget which would ensure that that objective is kept to over the next five years? To take him back to the important point that has just been made by the hon. Member for Birmingham, Edgbaston (Dame J. Knight), will he assure the House that from now on no one will be expelled from a long-stay mental hospital, only to find himself a dosser?

Mr. Clarke: On the hon. Gentleman's first point, decisions on resources can only be made in the public expenditure round next year. [AN HON. MEMBER: "It may not be forthcoming."] No. Most Departments of State and the Treasury are concerned about the public expenditure round this year. There is no point in expecting us to come to final decisions on a part of the public expenditure round for 1991 at this stage. However, the question of resources is important, so that everyone can plan. What my statement contained was a very clear, explicit statement binding the Government to the principles that we shall adopt in working out the right transfer of resources. When that transfer of resources takes place, the final figure will emerge in the public expenditure round next year.
I entirely share the hon. Gentleman's desire that no mentally ill patient should be discharged from hospital and touch is then lost with that patient, or care breaks down, so that he or she winds up in undesirable circumstances. Therefore I intend to ensure that National Health Service hospitals do not discharge patients until they are satisfied that proper arrangements have been made.

Mr. Frank Field: What is the Department going to do?

Mr. Clarke: It would not be realistic for every patient's case to be referred to the Department of Health so that the Department of Health can be satisfied. The practice has much improved, although there are places where it does not work now. In the past, there were some dreadfully bad examples of failure. Hospitals are no longer pushing people out, knowing that they will get into difficulties. The difficulty is that they were pushed out into what appeared to be adequate facilities. Then they left, went away and touch was lost with them.
We are ensuring that responsibility is clearly placed on the local authority, but a specific grant will be available which will be released by the health authority when it sees that local authority plans are there to keep in touch with patients and to provide them with the social care that they need. I very much share the desire that all of us have that there should be a big reduction in the number of incidents whereby mentally ill people fall into dreadful and destitute circumstances.

Mr. Nicholas Winterton: Will my right hon. and learned Friend assure the House that the National Health Service will continue to have responsibility not only for the treatment of the mentally ill, the mentally handicapped and the elderly, but also for the care of the mentally ill? How can he give the House an assurance that the social services of this country are competent or qualified to deal with the problems relating to the mentally ill?
Can my right hon. and learned Friend give the House an assurance that in his view there is a continuing need for long-stay hospital care for the mentally ill, particularly those suffering from schizophrenia? Despite what he said in his statement this afternoon, how will he ensure that mentally ill people will not end up in prison—as was discovered in an inquiry carried out by the Social Services Select Committee—in doss houses, in totally inadequate accommodation, on park benches and under the archways of such places as Waterloo station? Will he ensure that health authorities do not concern themselves more with the realisation of assets than with the care of people who require their help?

Mr. Clarke: I am entirely satisfied, in the light of my experience, that health authorities are concerned with the care of mentally ill patients in their charge and not with asset management, as my hon. Friend implied. Of course that must continue. Nothing that I have said today in any way reduces the responsibility of the National Health Service for hospital services for the mentally ill and the community care services, which have been so greatly expanded in recent years by community care units. The number of psychiatric nurses has doubled in five years in the 1980s and their number needs to increase further. Of course I accept the need for long-stay care in hospital, as that will always be required for those who suffer from acute illness or bouts of acute illness. However, the balance of provision between hospital care and community care is greatly changed. It has been changing for 20 years and it will continue to change. We are concentrating on ensuring the success of community care for those who ought not to be treated in hospital.
We have to avoid the scandals that my hon. Friend has described. I wish that some of the television exposeés of those scandals were accompanied by exposés of some of the scandals that used to exist in the long-stay mental institutions which we have closed, which were nightmarish institutions. We do not wish to go back to them. We now have the opportunity to link local authorities with health authorities, giving the health authorities the key to unlock the money for the specific grant that will pump-prime new and improved provision of social care for patients for whom the Health Service is trying to provide medical care in the community.

Mr. Alfred Morris: How does the Secretary of State square what he said about appropriate care for the mentally ill with the closure this Friday of a 24-bed hospital ward for the mentally ill in south Manchester, which, in the words of their consultant, means that his patients will have to wander the streets with nothing to do and nowhere to go? Will he stop that closure? Moreover, how does he reconcile what he said with the insistence by local authority leaders of all political persuasions that, due to lack of resources, they can no


longer meet their legal duties under the Chronically Sick and Disabled Persons Act 1970 which, as he knows, is all about community care?

Mr. Clarke: I know that South Manchester district health authority is the centre of enormous controversy about its services and their provision. It is financed on the same basis as any other health authority. If it wishes to make a closure that is contested it is referred to us and is approved by a Minister only if we are satisfied that there is a good health care case for doing so. We should leave South Manchester district health authority to discharge its responsibilities in the way it judges best. Half the Members of Parliament representing Manchester regard everything there as a political decision, but we are satisfied to approach them as health care decisions. I am quite satisfied that South Manchester district health authority is responsible for arranging its own services. If there is a contested closure, we shall consider it in the usual way.
Local authorities have had an enormous increase in resources—[HON. MEMBERS: "Where?"]—on personal social services. Local authority spending on personal social services has gone up by almost 39 per cent. above inflation in the lifetime of this Government. The last time that I was in Stockport, which is near Manchester, I was shown a letter by the director of social services explaining that he could not care for a patient because he needed another £1,500 million to bring his services up to the standard required. Frankly, many local authorities can discharge their responsibilities on present resources, continue to improve them and will look upon today's statement as a great challenge to enable them to improve them further.

Mr. Ray Whitney: I congratulate my right hon. and learned Friend on his long-awaited statement, which brings together a complex network of community care services. Given the uneven level of provision of personal social services and properly managed residential care homes by certain local authorities, will my right hon. and learned Friend in implementing his proposals take careful account of the need to stablish an effective national monitoring mechanism? In that way, the funds, which will undoubtedly continue to increase, will be properly used and the best national standards obtained throughout the country.

Mr. Clarke: I endorse the excellent objectives that my hon. Friend sets for us in monitoring local authority performance. As I said, all local authorities will have to produce community care plans in collaboration with health authorities and local voluntary bodies. We will, of course, consider those plans.
We have not gone down the specific grant route of trying to control all the plans, but are very much using the inspectorate route. My social services inspectorate will have an increased ability to step in and inquire into the delivery of services. I shall have increased powers to order reports and inquiries. Our inspectorate is producing advice on the management of local authority homes, which should give a clear guide to those local authorities that are not achieving adequate standards. This should ensure that, if they follow that guide, the standards of most will be brought nearer the standards of the best.

Mr. John McAllion: I deplore the fact that there has been no separate statement for Scotland and that Scottish Members must await a written reply to a planted question on today's Order Paper.
Will the right hon. and learned Gentleman explain why he has ignored Sir Roy Griffiths's recommendation that the public finance of residential home care should be the same whether it is in the public or the private sector? Does not the right hon. and learned Gentleman accept that, by announcing his intention to discriminate against the financing of local authority homes, he throws into utter confusion the planned provision of care in many areas such as Dundee, where a new major residential home is being built?

Mr. Clarke: My right hon. and learned Friend the Secretary of State for Scotland has been involved in the production of the Government policy that I announced today. It is entirely proper for him to produce a written statement setting out particular Scottish aspects of the policy, just as my right hon. Friend the Secretary of State for Social Security is producing a written statement on the social security implications.
The Gentleman's second point shows that he has misunderstood what I said. There is no change in what I am proposing for the financing of residents of local authority homes. If anything, the discrimination against them is greater under the system that we are replacing. At present, there is an incentive to put people in private residential homes instead of assessing the possibilities of the local authority making other provisions for them. Local authorities will find that, if there is any discrimination in the provision, it will be lessened by my proposals, not increased.

Mr. James Couchman: I am grateful to my right hon. and learned Friend for his statement. As a former chairman of social services and of a health authority, I know only too well the gaps and overlaps that exist. Clarification of responsibility will be welcome to all those who have followed community care matters for a long time.
What will happen to the funds that have been released by health authorities when people have been discharged from long-stay hospitals and that form a kind of dowry to those who now look after them? What will happen to the joint funding money that has been passed from the Health Service to social services as an enabling fund? What plans does my right hon. and learned Friend have for increasing the level of day activity for those who have been discharged from long-stay hospitals where day activity has been provided on site?

Mr. Clarke: I am grateful for my hon. Friend's opening remarks. He has considerable expertise which is relevant to both sides of the local authority and health authority fence. Joint funding will continue. We are considering whether we can improve its effectiveness and the way in which it is applied and used. The White Paper that we will publish in the autumn will provide more details.
The amount of day activity is increasing. The provision of an adequate level of day activity for mentally ill people is one of those matters that should definitely be addressed in the community care plan, when it is produced by local authorities in collaboration with health authorities. In future, it should be much easier not only to carry on increasing the level of day activity but to ensure that,


between them, the authorities know exactly what is required, so that plans are drawn up and they know where day activity is provided.

Mrs. Margaret Ewing: The Secretary of State has touched briefly on training. Does he accept that if we are to marry the assessment of need with the provision of service, there will be a clear requirement for a vast number of additional trained, qualified and professional social workers in field work and day care? Has he made any assessment of a budget for the provision of additional training for such people? Does he intend, unlike his right hon. and learned Friend the Secretary of State for Scotland, to ensure that people who suffer from degenerative mental illnesses, such as Alzheimer's disease, will be exempt from the community charge, which has placed an added burden on those who undertake care in the community at this stage?

Mr. Clarke: Social services is a labour-intensive activity, so the continued growth in the provision of personal social services is bound to lead to a growth in the number of staff employed. However, I am not setting a target, and we should not look for growth in the administrative staff as opposed to those delivering care. I recognise the need for training, and we already have some specific grants designed to encourage an increased level of training in care for the elderly. We shall continue to look at the case for any new specific grant, if that is required. I am sure that one of the first actions of local authorities with the new resources transferred to them from the Department of Social Security will be to consider how they will now be able to finance training to bring their staff to the required level of skill.

Mr. Jerry Hayes: Does my right hon. and learned Friend agree that the frail, the elderly and the most vulnerable will welcome his statement? For the first time, they will have clear guidance on health care packages, backed with cash. However, will he be vigilant in ensuring that local authorities, which will be vested with vast resources, spend those resources specifically on community care and that the resources are not abused?

Mr. Clarke: I welcome my hon. Friend's remarks about the frail, the elderly and the vulnerable, who are meant to be the point of the policy and who will be the beneficiaries of it. I am glad that my hon. Friend has concentrated on that, rather than on the interests of particular groups inside the local authority world, as some Opposition Members appear to be doing. It is important that we stimulate a high level of performance by local authorities. They now have a great opportunity and it is up to them to deliver a good standard of care. I have therefore already stressed the drawing up of the new plans, the involvement of health authorities in them, and the role I expect my social services inspectorate to play. It will be necessary to ensure that some local authorities raise their present standards and use the new resources to catch up with the best practice elsewhere.

Mr. Michael Foot: As it is almost impossible to exaggerate the agonies and anxieties of individual families and the individuals concerned with this question, and as those anxieties are bound to be intensified in a period of transition, will the right hon. and learned Gentleman tell us whether he has had any consultation with the people who work in the service, including the

Royal College of Nursing? When I asked the right hon. and learned Gentleman a similar question about his general health care plans, he passed it away with a sneer, but he should have learnt better by now. Should he not consult the people who do fine work in this respect, even finer than in the rest of the service, if that is possible?
In the transitional period and even over a longer period, will the Secretary of State and his Department retain, in one form or another, control over the reassessments that will take place of when people will be discharged into the community generally? The assurance for the whole system is bound to depend on those reassessments. The right hon. and learned Gentleman must do his best to give firm guarantees to the people concerned.

Mr. Clarke: On consultation, Sir Roy Griffiths and his team went round all those concerned with the subject in the first place before introducing their report. On production of the report, all those concerned made representations in the light of it. We received over 200. The Royal College of Nursing, which did not agree with all Sir Roy's recommendations, was one body which put representations to us, and we considered them carefully.
I agree entirely with the right hon. Gentleman that nothing worries a family more than the whole process of seeing an elderly relative reach the stage where some care will be required to ensure that he or she can cope and the transition period may be worrying. That is why I emphasise that all those who are in private residential homes and nursing homes now, and all those who will be there in 1991 when the new system starts, can rest assured that their present entitlement to social security and their resort to the social security system will continue unchanged. We do not want to start reopening the provision for all those who are now resident in private nursing homes.
The right hon. Gentleman asked about the discharge of mental patients. I do not think that this was what the hon. Member for Birkenhead (Mr. Field) had in mind but, in case it was, I said that we could not take responsibility for each patient. Plainly, we accept responsibility for monitoring the performance of health authorities and ensuring that they carry out the clear policy of the Government and the National Health Service that mentally ill patients should not be discharged from hospital unless satisfactory arrangements for their care await them in the community. Through our accountability procedures, we shall seek to ensure that all health authorities live up to that.

Mr. David Nicholson: Is my right hon. and learned Friend aware that there will be a widespread welcome for the consultations which preceded and are to follow today's statement? Is he also aware that we welcome the emphasis on public moneys devoted to such purposes being concentrated wherever possible on keeping people at home and in the community? Is my right hon. and learned Friend aware, however, that Tone Vale mental hospital is in my constituency, and staff and the families of patients are anxious that patients should not be discharged until proper mental care and social support is available?

Mr. Clarke: I am grateful to my hon. Friend. As he said, consultation will continue after today. There will be a White Paper in the autumn, but before we produce it we must start discussions with the local authorities and with health authorities about how we should prepare for the


new policy in 1991. That will include discussions of the resource implications, about which Opposition Members have asked.
I know of my hon. Friend's interest in the patients in the mental hospital in his constituency and I share his desire, and that of the staff, to ensure that no patients are discharged unless good-quality community care is available for them. The mental hospital in my constituency was closed about six months ago and I believe that in that case, over a long period, the transition was achieved successfully. The policy has certainly been implemented successfully in other parts of the county, although I quite understand how annoyed and distressed people become when the policy falls down in practice, as it has in the past.

Mr. Dafydd Wigley: Does the Secretary of State accept that, if people welcome the general direction that he is taking towards more community care, it will be to the extent that community care is right for the individual and not because it is a cut-price option? Does he accept that, in providing the right domiciliary services to enable people to stay in the community, we shall inevitably incur expenditure on services such as paramedical services —physiotherapy and so on? Does he realise that his statement cannot mean anything unless it is accompanied by additional resources to make it meaningful to those dependent on it?
Will the right hon. and learned Gentleman also clarify the position on the Disabled Persons (Services Consultation and Representation) Act 1986, in view of the doubts arising about section 7 from his earlier comments? Does he not realise that that Act provides a specific mechanism for assessing people's needs before they return to the community—an essential feature of any structure such as this? If the right hon. and learned Gentleman does not know the answer to that question now, can he arrange for a statement to be made on the 1986 Act as soon as possible?

Mr. Clarke: I agree with the hon. Gentleman's first two assertions. Community care is not a cut-price alternative to institutional care and it is not being promoted as a means of cutting expenditure. We foresee greater expenditure as demand increases, with the changed age profile of the country. As I have already said, expenditure on Health Service community care has increased by more than 40 per cent. during the Government's term of office, and expenditure on local government personal social services has increased by almost 39 per cent. My statement made clear our views about resources for the future. All that we can do at this stage in preparation for 1991 is to say that the final decisions must be made in the public expenditure round.
Now I have forgotten the hon. Gentleman's last point.

Mr. Wigley: The 1986 Act.

Mr. Clarke: Our policy on that Act has not changed. We made it clear at the time that, although the Act had been passed by the House, we could not commit ourselves to providing resources for it. We are not bound by that Act in tackling community care. I do not find section 7 very attractive. It tries to lay down a legalistic basis on which to assess individual patients and divides the mentally ill into categories, setting out one method for dealing with those

who have been in hospital for more than six months and another for dealing with those who have been in hospital for less than six months. As the new policies unfold, we shall all have the opportunity, no doubt, to re-examine the continued relevance of section 7.

Mr. John Hannam: I welcome my right hon. and learned Friend's statement, but I am slightly disturbed by his last answer. Does he accept that an integral part of care in the community must be efficacy, assessment, rights of appeal and pre-discharge planning? Does he agree that the 1986 Act contains the necessary statutory requirements for all those facilities to be provided? I therefore plead that he again looks at sections 1, 2, 3 and 7 of the Act to ensure that the patients' interests are properly met.

Mr. Clarke: As I said, I was not proposing to announce a change of policy on the 1986 Act. I had better repeat that I do not believe that I have. The Act was passed by the House, and the Government made their attitude to it quite clear then. What we have announced today is an improvement of policy. It opens the possibility of more service of the kind that my hon. Friend, who always closely follows matters concerning disabled people, was quite rightly urging. We have not changed the policy. We do not think that, on this occasion, it is right to use the 1986 Act to implement any part of what we are doing today.

Mr. David Hinchliffe: The free-market experiment in private care may have done a great deal to revive the fortunes of rundown seaside boarding houses and dilapidated Victorian institutions, but it has set back the development of genuine community care for generations. I am concerned that the public perception of care has been affected by the fact that people now believe that an institution is the only answer to elderly people's needs, the consequence being many elderly people in institutional care when they do not need to be.
In proposing to leave determination of provision largely to the private market, what guarantee have we that the market will help to develop alternatives to institutional care? In changing the role of local authorities to that of enablers rather than providers, what will a local authority's role be when it is asked to provide part III accommodation for people who are turfed out of the private sector and whom it does not want to know, and it no longer has that part III accommodation available?

Mr. Clarke: If I can disentangle what the hon. Gentleman said from the political jargon in which he wrapped it up, there is not a great deal between us. I agree that there should be no prejudgment in favour of residential institutional care vis-a-vis community care. We want someone to make a sensible assessment of what best suits an individual, taking account of that person's own wishes and desires. That is the key role that local authorities should play. There should not be any prejudgment that a local authority should provide it all. It is for a local authority to decide how best it can make suitable provision for individual people. I do not think that there is much difference in policy. I always find it difficult when the hon. Gentleman insists on seeing everything in terms of free-market this or local authority that. [Interruption.]

Mr. Hinchliffe: The Secretary of State has some room to talk.

Mr. Clarke: The hon. Gentleman attended, uninvited, my meeting in Leeds the other day on the National Health Service review. I hope that he found it interesting. When he realised that it was a serious discussion of how we were to implement it, he promptly left. No doubt he was expecting to listen to a debate about free-market versus Socialist solutions. He knows perfectly well that we are talking here about the sensitive delivery of care to individual people in the way that best suits their needs. That is what we want local authorities to do.

Mr. Patrick McLoughlin: Bearing in mind that some appalling local authorities despise private enterprise and involvement in this matter, when drawing up the legislation, will my right hon. and learned Friend take care to ensure that, in exceptional circumstances, he has power to step in to ensure that services are provided properly if a local authority abysmally fails, as some hon. Members may expect them to do?

Mr. Clarke: As I have said, I agree that this is important. I am proposing to take additional powers to ensure that I can inspect and call for reports on the way in which local authorities are carrying out their responsibilities. When drafting legislation, I will certainly consider what my hon. Friend says about the need for possible reserve powers to step in and provide services, although the experience of central Government in trying to step in and provide services when local authorities completely fail is not very happy. I hope that we are making them draw up care plans alongside the other agencies that are responsible—health authorities and voluntary bodies—and then giving my inspectorate the right to get in in time and give warning that they seem to be falling down on the job. The vast majority of local authorities will improve on the very good job that they are doing now in the light of the new policy, and we will take some new powers to ensure that we can chase the few that lag rather badly behind.

Mrs. Rosie Barnes: The Royal College of Nursing has made it clear that, according to its calculations, the number of totally dependent elderly people will increase by 100,000 by the year 2000. At present, more than one in five people over the age of 75 suffer from dementia and need round-the-clock care, and there is no evidence that this ratio will decrease. I am therefore interested to know what increased levels of funding the Secretary of State expects to be made available to increase the number of residential places available for a clearly defined and growing need.

Mr. Clarke: I agree entirely with the hon. Lady's analysis of the growing demand and the growing need. The continued expansion of psycho-geriatric services will be very important, exactly as she described. Today, we are dealing with a policy which will increase local authorities' ability to provide social services support to those people and to their friends who look after them in the community, or to pay for them to go into private residential or nursing homes, as many will, because that is the best way in which to care for them.
Other aspects of the policy need to be looked at, however. I quite agree that, when developing community health services within the National Health Service, we must give ever-increasing priority to psycho-geriatric

services. We will have a huge rise in the number of elderly people who suffer from Alzheimer's disease and other psycho-geriatric disorders.

Several Hon. Members: rose—

Mr. Speaker: Order. It is clear that it will not be possible to call every hon. Member who wishes to ask the Secretary of State a question. I shall therefore call four from each side, and then we must move on.

Sir Geoffrey Pattie: Does my right hon. and learned Friend accept that there will be widespread support for his statement today, particularly that part of it which relates to the mentally ill? Will he repeat the assurance that no mentally ill patients will be discharged into the community unless resources for their care are made available?

Mr. Clarke: I will certainly repeat it. I note again my right hon. Friend's interest in this matter, which I suspect is connected with his concern for the mental hospitals near his constituency. I think that the policy has always been correct in principle, but its implementation in practice has often left a great deal to be desired. Although things are improving, we now have to ensure that patients are not discharged unless there is adequate provision, and arrangements are improved to keep in touch with them once they are discharged.

Mr. Tony Worthington: Does the Secretary of State accept that, in two respects, he has left some confusion about the care of the mentally ill? First, he referred to giving money to allow local authorities to start pump-priming projects. Such projects start things off and someone else picks up the funding later. Who will pick up the funding later?
Secondly, it will be for the hospital boards to give a grant to local authorities when they are satisifed that a patient will be well looked after. What successful precedents have there been for one authority giving money to the control of another, thus losing control over the budget? That has been one of the problems with the current policy. Will the Secretary of State comment?

Mr. Clarke: I will attempt to clarify that. I am sorry if I have confused. I used the expression, "pump-priming" because we are talking about specific grants to be used for new services. Local authorities already provide some community care services for mentally ill people, although it is only about 1·5 per cent. of total social services expenditure. I used that phrase to make it clear that we are talking about a specific grant to 'encourage new provisions.
I also used the word "pump-priming" to make it clear that it would not be the only source of finance for new services. We want local authorities to carry on expanding of their own volition. There are plenty of precedents for specific grants, and this one will mean that the money is made available only to provide community care for mentally ill people—it is ring-fenced and can be used only for that purpose.
There is no exact precedent for the health authority acting as my agent for the release of that money in response to bids. However, I see no difficulty in that arrangement. It will ensure proper collaboration between the health authority and the local authority and will ensure


that the local authority's provision matches the health authority's expectations of needs for service arising from, for example, the pending closure of a hospital.

Mr. Andrew Rowe: Does my right hon. and learned Friend agree that there was a typical misuse of statistics when the hon. Member for Livingston (Mr. Cook) claimed that the statistics on home helps show that care is failing, when many local authorities such as mine are pioneering new services that are much better targeted than the old home help service? Does he further agree that the central pivot of the new process is the assessment procedure and that that entails collaboration between the Health Service and social service departments, which will be professionally touchy and difficult to achieve? Will he give an undertaking that, over the next two years, training will be made available for both sides involved in that difficult procedure, because otherwise I suspect that it will run into great difficulties?

Mr. Clarke: I agree with my hon. Friend's first point. The Opposition will never accept the inescapable fact that the background to this is 10 years of growth of expenditure and, even more importantly, of growth of the service for all the people we are talking about. At the moment, there is a growth of successful provision in most local authorities.
I also agree that collaboration between the health authorities and the local authorities is a key feature. We have introduced two new ways of encouraging that directly. The first is that those authorities will have to work together to draw up the community care plans. The second is that a specific grant will be released by the health authority when the local authority plans and the health authority plans for mentally ill people have been put in line.
We are now starting a process of discussions with local authorities and health authorities about the implementation of the policy. I am not sure that it requires the training of the senior staff concerned, but my Department's efforts will be bent to ensuring that, as they both prepare for the new policy, we do everything we can to encourage them to get together at local level in every case, involving the county councils and district health authorities.

Mr. Paul Boateng: Social workers and those who train them will read the Secretary of State's statement with interest, but they know—and surely he knows—that the reality is vacant places and case loads which have increasingly reached intolerably high levels. What is the Secretary of State going to do about the current national shortfall of social workers and especially about the crisis in London, where there are real problems in the recruitment and retention of social workers, because unless those central issues are addressed, all else is rhetoric?

Mr. Clarke: Of course, there is likely to be a continuing need for a growth in the number of social workers. The policy that I announced today of reinforcing the responsibility of local authorities and of the pending transfer of resources to enable them to do that will further that process. I know that the provision and condition of social services varies from place to place—this is not the time to go into that—but it is the management of the services in some of the London boroughs to which the hon.

Gentleman has referred which most urgently needs to be addressed if the authorities are to get the best out of the opportunities that we have announced today.

Mr. Keith Raffan: Is my right hon. and learned Friend aware that his statement will be especially welcome to hon. Members such as myself who represent seaside communities, who have witnessed with considerable concern the proliferation of residential homes of an uneven quality in recent years, and who want to see a much better balance between home care and institutional care? What further measures does he envisage to raise the standard of those residential homes, following the Registered Homes Act 1984?

Mr. Clarke: Local authorities and health authorities have an existing duty to inspect and register such homes. The position remains unchanged for those who are residents in public homes. Residents of private homes who need public support will have help from the local authority in financing their place. Therefore, the local authority will not only inspect and register the home if it is a residential home—the health authority will perform that function if it is a nursing home—but will be buying that provision, having decided and accepted the responsibility for saying that that is the most suitable accommodation for the old person in question. The risk of people with public support entering homes that are sub-standard or to which they do not want to go will be greatly reduced by what we have announced today.

Mr. Terry Davis: Is the Secretary of State aware that many elderly people in Birmingham prefer to live in homes that are run as a service by the city council instead of living in private homes that are run to make a profit? Why does he insist on continuing what is, in effect, a financial penalty on the city council for seeking to meet the wishes of elderly people?

Mr. Clarke: We have all been around many old people's homes and nursing homes. I have not found many people who are obsessed with whether the home that they are in is being run for profit or by the council. They are more concerned about whether a good standard of care is achieved in a good residential setting. That depends on the quality of the staff and on the quality of the care provided, regardless of ownership.
We are not changing the method of financing residents in local authority homes and we see no case for doing so for the reason that I gave earlier. No new discrimination is being introduced. We believe that most local authorities will want to concentrate on their new responsibilities and will not want to see a big expansion of their own management role in providing a service that they can get from others.

Mr. Alastair Goodlad: Will my right hon. and learned Friend accept that his statement will be widely welcomed in many homes throughout the country and by those who work in community care—especially his confirmation that the arrangements affecting the mentally ill will be amplified by the Under-Secretary tomorrow? Does he recognise that the availability of hospital treatment for those who need it—especially for those suffering from conditions such as schizophrenia, which recurs at unpredictable intervals—depends as much as


anything else on the continued dedication and skill of those who work in our much too frequently maligned mental hospitals?

Mr. Clarke: I gladly agree with that. Schizophrenia is a particularly worrying condition; hospital treatment is absolutely necessary for all those who suffer from acute schizophrenia. Sometimes people are released into the community where they can satisfactorily enjoy a higher quality of life, but if they suffer a recurrence of acute schizophrenia they may require urgent readmission to hospital. I hope that the arrangements that I am proposing will enable us to keep in touch with those patients to ensure their prompt return to a secure and caring hospital setting whenever that is required. At the moment, such patients sometimes get lost and are found acutely ill and not being cared for, and that is something that we wish to avoid.

Mr. Tom Clarke: Does the right hon. and learned Gentleman accept that he will have to clarify the question about section 7 of the Disabled Persons (Services, Consultation and Representation) Act 1986 before he leaves the Chamber? If he has a word with his right hon. Friend the former Minister for Health, the present Chancellor of the Duchy of Lancaster, he will find—this will be confirmed by his hon. Friend the Member for Exeter (Mr. Hannam) and by the hon. Member for Caernarfon (Mr. Wigley), among other sponsors of that Bill—that that section, which the Secretary of State has criticised today, was included at the positive insistence of his right hon. Friend the former Minister for Health? Furthermore, some of the criticisms that we have heard this afternoon were advanced by the sponsors at that time. However, the then Minister for Health refused to budge one inch, and it would have jeopardised the whole Bill had we insisted upon the measures that the Secretary of State has advanced this afternoon. Will the right hon. and learned Gentleman clarify that position?
Does the Secretary of State accept that, although the laudable objectives that he explained to the House about making proper arrangements and assessments for psychiatric patients leaving hospital and going into the community are welcome, they are not, at the moment, embraced in any legislation? If the Secretary of State is not going to implement section 7, is he going to amend it or to introduce new legislation to achieve his own objective? Has he therefore changed Government policy? Every Minister, including the Prime Minister, has said that it is the Government's intention to implement section 7 when the resources become available.
Finally, when the Secretary of State said that a White Paper would be made available in the autumn, did he mean during the recess?

Mr. Kenneth Clarke: I will gladly take the opportunity, when next I get it, of refreshing my memory of the debates in which I did not take part a few years ago. If I find that the hon. Gentleman was then expressing the doubts about section 7 that I have expressed today, I will review the position in the light of that.
I am not changing policy in relation to the 1986 Act and I am certainly not announcing today the implementation of section 7. We must now proceed with the new policy

which, as my hon. Friend the Member for Eddisbury (Mr. Goodlad) said a moment ago, will be widely welcomed; we must then reassess the relevance of section 7 in the light of that.
The White Paper will be produced in the autumn. I do not have a firm timetable in mind, but it will probably be in the recess. If it is, I am sure that there will be plenty of opportunity to talk about it thereafter, because the policy will not be brought into effect until 1991.

Several Hon. Members: rose—

Mr. Speaker: I am sorry that I have not been able to call—

Hon. Members: On a point of order.

Mr. Speaker: Order. Let me get my point of order in first.
I am sorry that I have not been able to call those hon. Members who were rising today, but I will certainly bear their claims in mind for the next opportunity to discuss the matter, possibly when we have Health questions.

Mr. William O'Brien: On a point of order, Mr. Speaker. The Secretary of State's statement skipped over the important issue of housing. Could we have a report on the important issues of aids and adaptations to stairs in housing at some time in the future—

Mr. Speaker: Order. I am afraid that this looks a clear case of continuation of questions on the statement.

Mr. Bob Cryer:: Mine is different.

Mr. Speaker: A point of order?

Mr. Cryer: On a point of order, Mr. Speaker. Have you had any requests from the Secretary of State for the Environment to come to the House to make a statement, because many important matters are at issue, about the selling off of old people's homes by the Tory spivs on Bradford council? This was mentioned by my hon. Friend the Member for Livingston (Mr. Cook), but the Secretary of State did not respond to the point, possibly because it is not his direct responsibility. It is something of serious concern about which we should have a statement.

Mr. Speaker: I am sure that that has been heard.

Mr. William McKelvey: On a point of order, Mr. Speaker.

Mr. Speaker: Is it a point of order for me?

Mr. McKelvey: Yes, Sir. Is it in order for an answer to be given in reply to a written question on an important issue affecting the whole of Scotland, when the planter is not here to hear the debate and there is no Minister for Scotland on the Government Bench? It is disgraceful that that practice is allowed to continue.

Mr. Speaker: That is not a matter for me, but I did my best to bear in mind the claims of Scotland by calling a number of hon. Members representing Scotland.

BILL PRESENTED

CONTROL OF TOXIC WASTE RESIDUES

Mr. Frank Cook, supported by Ms. Marjorie Mowlam, Mr. Ted Leadbitter, Ms. Joyce Quin, Mr. John Cummings, Ms. Hilary Armstrong, Mr. Don Dixon. Ms. Joan Ruddock, Mr. Allan Roberts, Mrs. Ann Clwyd, Mr. Tony Lloyd and Ms. Joan Walley, presented a Bill to protect the environment by controlling the manufacture and by regulating the disposal of toxic waste residues; and for connected purposes: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 181.]

Energy Efficiency (Labelling)

Mr. Malcolm Moss: I beg to move,
That leave be given to bring in a Bill to introduce compulsory labelling of all domestic electrical appliances and devices to indicate the amount of energy that they consume; to impose penalties upon manufacturers and retailers who fail to provide such labelling; and for connected purposes.
One of the most surprising results of recent opinion polls on the environment was that in The Times, in which 12 million people said that they were prepared to pay substantial premiums for "environmentally friendly" products.
Without question, one of the most significant environmental problems facing the planet today is that of global warming, or the so-called greenhouse effect. While in no way would I wish to pre-empt the report of the Select Committee on Energy on the linkage between energy and the greenhouse effect, many facts pertaining to that phenomenon are already in the public domain.
It is generally agreed that about 50 per cent. of the contribution to greenhouse gases is made by carbon dioxide gas—the rest is made by methane, CFCs, nitrous oxide and surface ozone. At the Toronto meeting of world experts last June to consider the threats posed by changes to the global atmosphere, it was agreed that substantial global reductions of carbon dioxide emissions would be necessary over the next 40 years.
The United Kingdom production of carbon dioxide is 542 million tonnes a year, of which 205 million tonnes—about 38 per cent.—are produced by generating electricity, mainly from coal-fired power stations. To emphasise the direct link between electricity and carbon dioxide emissions, I shall take the simple example of a 100W light bulb. When lit for 10 hours, it produces 1 kg of carbon dioxide. Over the average lifetime of 1,000 hours, 10 such light bulbs would produce 1 tonne of carbon dioxide. If we continue much as we have in the past, carbon dioxide output is likely to increase by more than 100 million tonnes—20 per cent.—by the year 2005. Any reduction, therefore, in electricity consumption will have a direct effect on carbon dioxide emissions and help to combat the greenhouse effect.
At a time of economic growth—both actual and predicted—demand is more likely to increase than decrease. The options are consequently rather limited and range between fuel substitution—that is, substituting gas for coal in our power stations—more nuclear power, which produces no carbon dioxide, and more energy conservation and efficiency.
The opportunities for improvements in energy efficiency lie in four main areas. First, the generation of electricity could be improved. It is worth noting that, for every 1,000 MW of coal-fired capacity replaced by renewable or nuclear generation, there is a reduction of 6 million tonnes of carbon dioxide, which is 3 per cent. of our total electricial sector emissions. Secondly, we could improve electrical motors, which is by far the largest single category in industry. Thirdly, we could improve lighting. Fluorescent light bulbs are already available in this country that reduce the running costs of lighting and the consumption of electricity by a factor of 80 per cent.
Fourthly, by the use of the correct electrical appliances, there is potential for a reduction in electrical consumption.
There are wide differences in electrical consumption between appliances available in this country. A closer look at the differences between appliances reveals some remarkable figures. The average United Kingdom stock of refrigerators will each consume about 1,100 kW hours per year, but the best available mass produced refrigerator consumes only 180 kW hours per year, which is a reduction of 80 per cent. The same figures are true for freezers. For washing machines and dishwashers, the energy saving is 50 per cent.
Those machines are manufactured in Canada, the United States, Japan, West Germany and Denmark. I point especially to the latter two producers, because, come 1992, I can see that we will have considerable competition for appliance imports from those sources.
It has been postulated that if each household replaced current appliances with the best available, annual running costs would reduce by 75 per cent. Such a reduction in electricity consumption on electrical appliances alone would cut the United Kingdom's carbon dioxide output by almost 6 per cent.
It is generally agreed that no one policy option alone can ensure the necessary reduction in carbon dioxide emissions. The Toronto conference suggested 20 per cent. reductions by the year 2003. However, in a recent paper to Ministers, Mr. Ken Currie, of the energy technology supply unit, said that the Toronto targets were going to be very difficult to achieve.
The debate raging at present—manifested in the amendment to the Electricity Bill before their Lordships—is whether or not the newly privatised electricity supply industry gives sufficient powers to the Secretary of State or the director general to ensure changes in energy efficiency practice that will make progress towards a reduction in carbon dioxide emissions. The Bill states categorically that the director general will have powers to promote energy efficiency, but it stops short of ideas such as "least cost planning" and any fiscal measures.
According to Mr. Currie, energy efficiency offers on paper the greatest scope in combating global warming through carbon dioxide emissions. However, despite great economic and technical potential for improved efficiency, it is very difficult to make it happen. The reasons are that it requires very large numbers of small and disaggregated actions—every light bulb in every home, so to speak; those actions are peripheral to the interests of many consumers; there is a slow turnover in equipment and buildings; and the problem is exacerbated by market imperfections, such as the lack of specific and unbiased information for the users.
I submit that it would be irresponsible not to make a start somewhere to break into this somewhat vicious circle, and where better than in the task of educating the public, as responsible consumers, by providing better information on energy efficiency? As a first step, we could introduce an energy efficiency labelling scheme for electrical appliances, which is exactly what my Bill attempts to do.
At present it is impossible to discover in the showroom or in the literature whether an appliance is efficient. A simple labelling scheme would give customers such information and would allow them to take energy and environmenal effects into account at the time of purchase. Schemes have been tried in the United Kingdom— unfortunately, unsuccessfully. John Lewis undertook a scheme for fridges and a pilot scheme was undertaken by Eastern electricity under the guidance of the Energy

Efficiency Office. Ecological labelling has been a feature in many other countries. Consider, for example, the success of the Blue Angel scheme in West Germany. Currently, Ministers of the Department of Trade and Industry and of the Department of the Environment are discussing a green labelling scheme for this country. Labelling is not therefore a new concept for the country or the Government.
To be effective, labelling must not be over-regulatory or nit-picking. There is little point in using labels on those appliances where the difference in operating costs is minimal—for example, on microwave ovens, televisions, clothes dryers and home-heating equipment. Labelling would be of little use on those appliances that have small electricity consumption—for example, toasters and blenders.
Labelling therefore must be concentrated on those major appliances that have the most significant differences in electricial consumption—refrigerators, fridge-freezers, freezers, water heaters, washing machines, dishwashers and room air conditioners. Successful appliance labelling schemes are in operation in Germany, Australia and in the United States, which has by far the most comprehensive scheme.
The three essential characteristics of a good labelling scheme would be simple and clear presentation, relevant and understandable information and attractive, eye-catching design. My Bill would make it compulsory for manufacturers and retailers to label their electrical appliances to a standard and a regularised format. There would be three types of label, along the lines of the American model. First, an energy cost label would apply to fridges, freezers, water heaters and washing machines. That would show the actual electricity consumption, the estimated annual cost to operate based on average electricity prices, and the range of operating costs of competing brands of similar size and features. Secondly, there would be a generic label for boilers and furnaces; and, thirdly, an energy efficient rating label that would apply to air-conditioning equipment. The labels would have to be prominently displayed on the appliance and of a standard size and design, and would comply with European Community regulations.
I agree with my right hon. Friend the Prime Minister who said last December at the Royal Academy that we must heed the dangers posed by the greenhouse effect and that to ignore it could expose us to climatic changes whose dimensions and effects are unpredictable. She also said that energy efficiency is crucial.
Energy efficiency is a complex subject, not open to simplistic or easy solutions. Energy efficiency measures should be practical and workable. My Bill seeks to achieve those ends, and I commend it to the House.

Question put and agreed to.

Bill ordered to be brought in by Mr. Malcolm Moss, Mr. John Hannam, Mr. Roger Knapman, Mr. Michael Morris, Mr. David Curry, Mr. Michael Brown, Mr. Chris Butler, Dr. Michael Clark, Miss Ann Widdecombe, Mr. Ian Taylor and Mr. Peter Rost.

ENERGY EFFICIENCY (LABELLING)

Mr. Malcolm Moss accordingly presented a Bill to introduce compulsory labelling of all domestic electrical appliances and devices to indicate the amount of energy that they consume; to impose penalties upon manufacturers and retailers who fail to provide such labelling; and


for connected purposes; And the same was read the First time; and ordered to be read a Second time upon Monday 24 July and to be printed. [Bill 182.]

Orders of the Day — Finance Bill

Not amended in the Committee (and as amended in the Standing Committee), further considered.

New Clause 4

PRIVATE MEDICAL INSURANCE (No. I)

'(1) Notwithstanding the provisions of section 56 concerning certification of contracts, premiums paid under such contracts shall be eligible for relief under section 54 whether or not the costs which are the subject of the indemnity in the contract relate only to charges levied by a certified provider.
(2) For the purposes of this clause a certified provider is either:

(a) the National Health Service, or
(b) a person providing treatments and medical services who

(i) undertake training of staff to a standard which is certified by the Department of Health to be at least comparable to that provided within the National Health Service,
(ii) when recruiting and employing staff trained within the National health service make a payment to the NHS to reimburse that service for the full cost of the training provided, and
(iii) are certified by the Department of Health as providing a full range of treatments and medical services for the elderly.

(3) An annual report shall be made by the Board distinguishing relief available in respect of certified contracts covering certified providers.'.—[Dr. Marek.]

Brought up, and read the First time.

Dr. John Marek: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Sir Paul Dean): With this it will be convenient to discuss new clause 10—Private Medical Insurance (No. 2)—
`(1) Notwithstanding the provisions of section 56 concerning certification of contracts, no premiums paid under such contracts shall be eligible for relief under section 54 unless the costs which are the subject of the indemnity in the contract relate only to charges levied by a certified provider.
(2) For the purposes of this clause a certified provider is either:

(a) the National Health Service or
(b) a person providing treatments and medical services who:

(i) undertakes training of staff to a standard which is certified by the Department of Health to be at least comparable to that provided within the National Health Service,
(ii) when recruiting and employing staff trained within the National Health Service makes a payment to the NHS to reimburse that service for the full cost of the training provided; and
(iii) are certified by the Department of Health as providing a full range of treatments and medical services for the elderly.'.

Dr. Marek: New clause 4 seeks to tighten up some of the handouts and giveaways that the Government propose with their tax relief on private medical insurance.
When the tax relief was hinted at in the Budget it came as a great surprise to the Opposition. That relief is contrary to the principles and statements that I have heard in Committees considering Finance Bills. It is certainly


contrary to the principles that have been espoused by the Financial Secretary to the Treasury and by the Economic Secretary to the Treasury. They know that there is only a small difference between the way in which the Opposition would tackle the reform of certain parts of taxation and the way in which they have done it. We are completely at a loss to understand the introduction of tax relief on private medical insurance. The only explanation is that they have had their orders and that, faithful to their mistress, they have simply jumped to it and ordered their civil servants and the parliamentary draftsmen to allow her to get her way once again.
I shall not be accused of not telling the truth when I say that that tax relief is not wanted by the Treasury. For the life of me, I cannot perceive the principles that allow the Treasury to include this relief in the Finance Bill. The Financial Secretary will be replying to this debate, and we and people outside will want him to explain why that tax relief should be in the Finance Bill; after all, Government Members will have to vote for it later.
This tax relief is contrary to many of the financial principles that have been espoused by hon. Members on the Treasury Front Bench in recent years. It is also a dangerous proposal as it represents part of the scheme to break up the National Health Service. This afternoon we had a statement on the Griffiths report; it is difficult to say what the outcome of that statement will be in the long run. No doubt it will depend on the amount of money that the Government make available for the proposals that the Secretary of State for Health outlined. If the money is not there, however, it is likely that that part of the Health Service connected with community care will suffer and wither away. What is left will provide a second-class service for people who depend on the NHS while a first-class service will be provided in the private sector. The Government's proposals on medical insurance will play their part in that as tax relief will be given to people who have private medical insurance.

Mr. Ian Taylor: The argument has been rehearsed in Committee. The hon. Gentleman should know that that tax relief does not mean the destruction, or even a move towards the destruction, of the NHS. In a sense the proposals are a means of strengthening provision to elderly people across the board by enabling those people, many of whom have already opted for private health care, to continue it during their retirement. It is an wholly interesting proposal and I am sure that the Treasury is as enthusiastic for it as are my hon. Friends on the Back Benches.

Dr. Marek: The Treasury will have to speak for itself in due course. Many hon. Members are extremely concerned about those proposals. New clause 4 would make the operation of those proposals more open and more available to the public for scrutiny.
If many people are already paying for private medical insurance, as the hon. Member for Esher (Mr. Taylor) suggested, what is the point of giving them further money in the form of tax handouts from the state purse? The hon. Gentleman cannot argue that the relief is an incentive to take out private medical insurance if people have already done so. From figures available to me it is clear that only 2·6 per cent. of pensioners are paying the 40 per cent. tax rate. It is those pensioners who will receive the greatest tax handout as they pay the highest rate of income tax.
We have a deep-rooted objection to the proposals in the Finance Bill. We tried to defeat the relevant clauses in Committee, but the Government had a large majority and we did not have a chance. It was impossible to effect any opposition.
Even though I suspect that at the back of their minds and in their hearts many Conservative Members realise that this runs counter to many other policies in the Finance Bill, they are not prepared to stand up and say so. They are not prepared to say, "We have had to do this simply because the Prime Minister has decided for some reason or another that this tax handout is to be given to the rich and the super rich." I say that because the Financial Secretary would be disappointed if I did not use that form of words at some time while proposing the new clause.
If the proposals are not available for the public to scrutinise, a great deal of money will be given away, the public will be none the wiser and an activity that we believe to be dreadfully wrong will be carried out from year to year without public scrutiny. The new clause would prevent that. We seek to expose what is happening because we believe that the National Health Service is about to be broken up. We believe that not just because of the proposals that we heard this afternoon, but because of the Government's proposals in relation to the elderly and mentally ill, hospitals being able to opt out of the National Health Service and doctors being able to run their own budgets. Our worry is compounded by these proposals because people who take private medical care and opt out will receive tax handouts.

Mr. David Curry: Does the hon. Gentleman accept that by repeating the words "opt out of the NHS" he is deliberately misrepresenting the Government's proposals? Hospitals are being invited to opt for self-governing status within the NHS. Will he cease to perpetrate this myth, which is carried on in the media and forms part of a campaign that simply misrepresents the Government's proposals? Can he not see that there is a distinction between hospitals governing themselves and being governed by their own management within the system and the "opt out" to which he refers? It does him no credit to keep perpetrating this myth in the hope that eventually it will be repeated, parrot-like, across the country.

Dr. Marek: For every time that the Opposition can be accused of trying to mislead the public, they can levy the charge 10 times against the Government for using selective statistics or figures. They start in 1979 when it suits them, or in 1983 when 1979 figures are not so suitable, or they use those for the past two or three years when 1979 or 1983 figures are unsuitable.

The Economic Secretary to the Treasury (Mr. Peter Lilley): The hon. Gentleman admits to misleading the public.

Dr. Marek: I do not admit to trying to mislead the public, as the Economic Secretary suggests; I am being accurate. Hospitals will opt out of an integrated National Health Service that is free at the point of need. If they become self-governing, the cheque book mentality will come to the fore. But I shall not pursue that line because I could stray a little too far from the new clause, although


that would ensure that any of these activities is open to public scrutiny and scrutiny by the House and that annual reports will he prepared.
The problem with medical tax insurance is that people must be rich enough to afford it. If they do not pay income tax, the Government will not give them anything. If they pay only a little bit of income tax, they will not receive much. They have to be rich to be able to afford to take advantage of the Government's proposals. The richer one is, the better off one will be. The Government's philosophy is that, to those who have shall be given.
Not only do people have to be rich enough, but they must be well enough to sign up. If they are chronically ill or have a bad medical history, no insurance company will take them on. It is yet again to a small class of people that this Government seek to, and will, give money from the Treasury which could well be spent elsewhere. We are being asked to subsidise, from our taxes, the private medical insurance of people who are already wealthy enough and who, by and large, already pay for private treatment without the need for subsidy.
Our new clause would constrain the Government by making them open their books and to account publicly for how the money will be given away. It also makes them justify the scheme's operation.

Mr. James Couchman: The hon. Gentleman has just talked about people who are "wealthy enough" and do not need the help offered under the Government's proposals. He will be aware that old-age pensioners receiving state pension use almost all their age allowance with the state pension. Anyone who has a modest occupational pension or even earnings above that level will pay income tax at the standard rate and will therefore benefit from the proposals. By no stretch of the imagination could those people be called wealthy.

Dr. Marek: Exactly—there is much sense in what the hon. Gentleman has said. People with small occupational pensions, who, I agree, are certainly not wealthy, will not have enough money to take out private medical insurance and still have enough left for their daily needs and to be able to lead sensible lives in their old age. Those people are not the targets of this tax handout and giveaway. The targets are those who are much wealthier than people with ordinary occupational pensions. I hope that the hon. Gentleman understands that point.
Of course, it is possible for people who are paying income tax to benefit from this tax handout by obtaining private medical insurance. However, I suspect that people in those circumstances will be able to say, "I am sorry. The money that we have available at our disposal at the end of every week is insufficient for us to afford the luxury of private medical insurance." They could rightly say, "We shall stick with the National Health Service."

Mr. Nicholas Bennett: The hon. Gentleman uses the terms "rich" and "super rich". For those of us who have not had the advantage of serving on the Committee, will he define those terms? Which level of income constitutes "rich" and which "super rich"?

Dr. Marek: The hon. Gentleman must sign up, become a member of the next Finance Bill Committee and take part in our discussions. The question that he posed has

been asked before. I shall disappoint the hon. Gentleman if he thinks that I am about to give a cast-iron definition so that people with a penny less than the sum stipulated will not be in the super rich category and those with a penny more will definitely be in it. He must take me for being slightly naive. Perhaps I am sometimes, but I am not naive enough to give such a definition.
Some people are extremely rich and have so much money that they do not know what to do with it. They cannot even find out how much money they have. There are people in this country who do not know how much they are worth. They have millions of pounds—or at least hundreds of thousands of pounds—of ready, available liquid assets over and above any insurances, houses or property. They would fall into the class of the super, super rich. There are people who are not in that class, but I shall not take up any more of the House's time with that definition. I hope that I have been able to educate the hon. Member for Pembroke (Mr. Bennett) a little.
The Opposition object to the proposals because they represent bad taxation policy. There is no case for them. Hon. Members need only to cast their minds back to debates in Committee and yesterday when pleas were made for concessions. Hon. Members from both sides of the House said that this was not the right way to run a fair tax policy with a level playing field. The Opposition would be the first to say that, in some circumstances, we would not want a level playing field, but there must be justifiable reasons for it. Those reasons do not exist in this case.
For private medical insurance to receive tax relief is clearly against every principle that the Financial Secretary and the Economic Secretary espoused in Committee. It is the equivalent of the Financial Secretary going to Lord's on a dark night and digging up the cricket pitch. He had a level playing field but has now decided to roughen it up so that it slopes upwards and forces those without money to bowl uphill, whereas those with money can bowl the other way. That is a reasonable analogy for what the Government are doing.
The new clause would also bring under public scrutiny the point that the relief is not well targeted. Instead of targeting those who need more medical care or medical insurance, the Government are targeting those who can stay with the NHS or who already have money and do not need extra handouts. The Financial Secretary does not have up his sleeve an argument to contradict what I have just said. We accept that benefits have to be targeted, and we have listened to the Secretary of State for Social Security, the Secretary of State for Health and other Ministers tell us that every benefit must be targeted so that relief goes to those who need it. However, there is no targeting with this provision. It is a straightforward handout to people who have money and are already using it for medical insurance. There is no incentive argument or targeting argument for it.

Mr. Nicholas Bennett: The same argument applies to child benefit. Why is the Labour party opposed to targeting child benefit and taxing that?

Dr. Marek: I do not want to stray too far, but I can answer the hon. Gentleman. There is a difference with child benefit. It goes to the mother, there is a 100 per cent. take-up and, although the targeting is not perfect, it is not bad. The targeting percentage score for child benefit is between 60 and 80 per cent., but for this measure it is zilch.
We should like to bring under public scrutiny the fact that if anybody wants family credit or income support, he has to fill up forms and be interviewed, and snooper squads come round to his house if there is any hint of impropriety or if a jealous neighbour tries to get his own back. The full panoply of state supervision and state regulation, and the overburdening authority of the state, are put on those people by the Government and the Conservative party.
However, if one wants private medical insurance, one need only send a little note to one's accountant and he will fix everything. There are no snoopers and no reams of forms to fill in. It is all straightforward. One does not have to appear in a social security office, wait in a long queue and waste a morning to get one's entitlement. The philosophy is completely different. That is another difference between the Government's attitude towards income support and family credit and their attitude towards this measure.

Mr. Couchman: I thank the hon. Gentleman for his generosity in giving way again. On this point, will he concede that there is a difference between making an allowance against income tax—that is, not taking away so much income tax—and distributing public funds by way of income support, which is distributing new money to the recipient? The hon. Gentleman said that there would be no snooping, but the Inland Revenue takes a healthy interest in our tax affairs, and if it has any suspicions, I am sure that it will be there just as enthusiastically as would be the Department of Social Security investigating team in other circumstances.

Dr. Marek: I hope that, if the new clause is passed, some of the reports that will be produced will bear out my point. If the Government appointed enough income tax inspectors so that the Inland Revenue could take proper control over those whom it thought were fiddling income tax returns—most of whom have something to do with the City—it would be more efficient. I know that most people in the City are honest, but some are not and they fiddle enormously large sums. Furthermore, if income tax inspectors were paid properly, they would not fly off to private industry as they do because of the Government's Scrooge-like policies.
On the hon. Gentleman's second point, the only difference is administrative. The effect of giving money, either as a tax allowance or as a grant, is to ensure that people can lead decent and dignified lives. Whether people receive that money by way of tax allowance or by way of grant from the Department of Social Security is neither here nor there. There is no effective difference. I hope that the hon. Gentleman will think about that. We have to treat people on the same basis even though the circumstances of some people are different from those of others.
I have here an important figure on which I hope that some of my hon. Friends will expand later: two thirds of pensioner households pay no income tax. Therefore, they will not benefit from these tax handouts. Only 2·6 per cent. of pensioners pay the top rate—40 per cent.—of tax. Only 2·6 per cent. of pensioners will benefit from this measure. It will be worse than that, because pensioners do not have to pay for these benefits. Often their yuppie children will pay for them, so this measure is a licence to allow a yuppie who wants to to pay money for the care of his or her elderly parents.

The Financial Secretary to the Treasury (Mr. Norman Lamont): Why does the hon. Gentleman think that it is impossible for non-taxpayers to benefit from what is in the Bill?

Dr. Marek: It is not impossible. I have not examined the statistics, but I think that I am right to say that, by and large, pensioners who do not pay income tax cannot pay income tax and are not in a family group with yuppies so rich that they can pay for private medical insurance. I am prepared to be persuaded by the right hon. Gentleman, but he will have to see whether his civil servants can provide any statistics for his assertion. I think that they probably cannot.
We are against these proposals because treatment in the National Health Service is much cheaper than treatment in private hospitals. I can give a simple example. In the NHS, the cost of a tonsillectomy is £360, but the private cost can be anything from £600 to £1,400. This tax relief is aimed at the wrong target. Instead of using the money by way of tax relief, it should be given to the NHS so that it can provide for the medical welfare of our old-age pensioners direct, and when they need it.
We have tabled the new clause because we object to the original proposals and we want to make sure that the results of the clauses that the Government insisted should be included in the Bill are open to public scrutiny in due course. The sum involved is large—the Treasury suggests £40 million, but we suspect that it will be about £200 million. Some people suspect that it is an open-ended commitment.
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I hope that the Government will recognise our need to be given the details of the scheme. Without those details, the new clause was restricted to providing that an annual report, covering various matters, should be made by the board. The Chief Secretary wrote to my hon. Friend the Member for Dunfermline, East (Mr. Brown) on 6 June, enclosing a copy of a letter to medical insurance companies asking for details of how the proposed scheme would operate. I believe that a copy of that letter has now been placed in the Library.
There are some curious aspects to the scheme. For example, treatment must take place at an NHS hospital, at a hospital instituted by a special Act of Parliament or incorporated by Royal Charter, or at premises registered under part II of the Registered Homes Act 1984. Does that mean that the public will be giving tax handouts to rich people staying in registered old people's homes? What is the substance of the Government's argument? Is the scheme supposed to be some sort of incentive? Earlier today the Secretary of State for Health said that, wherever possible, old people should be in the community. The proposals are contrary not only to previous Treasury policy, but to the policy of the Department of Health.
I am glad to note that there will be some rules and regulations on qualifying benefits. According to the consultation document, accommodation charges will qualify, including those for parents accompanying a child. Home nursing charges will also qualify. The only people who will benefit from that are the very rich, who would have home nursing anyway and do not need to be given a cash handout as a little sweetener. There will be a cash maternity benefit. It is surely no part of the state's job to give cash handouts to people who want to insure against


maternity. Of course, it is part of the state's job to ensure that there is adequate maternity and paternity leave for all, irrespective of wealth. Parents should be able to bear a child without hardship. A proposal to give a cash handout to the rich people who want to insure against maternity shows the Tory party for what it is, who its friends are, what its priorities are and who it supports.
When we consider other amendments later, I might adopt a different tone because some of the Government's amendments are helpful. However, the medical insurance clauses are ill-advised, ill-thought-out and badly targeted because they serve only the rich. The Government have not even drawn up the regulations. I commend our new clause to the House.

Mr. Kenneth Hind: As is usual in these debates, the Opposition have shown a mindless objection to anything that smacks of individual initiative or of benefit to those prepared to put their hands in their pockets to pay for it. Underlying the Opposition's arguments is their fundamental objection to private medical care. They will oppose any measure, no matter who it benefits, on that principle alone.
I wish to raise one important aspect of our health care. Britain's health spending in the public sector is comparable to that of most European Community and OECD countries. However, on health spending in the private sector Britain is a long way behind. The Opposition forget that, in general, the two expenditures are added together, so they criticise the Government and claim that other countries—especially West Germany—spend far more than Britain.
The Bill will help those in need to redress the imbalance by increasing the amount of private health spend and so provide a more realistic view of our overall health spending. The medical insurance clauses prime pump additional resources into Britain's health care facilities and will attract resources that otherwise would not come into the system. Without those additional resources, the cost of providing health care for the elderly would fall entirely upon the NHS and the taxpayers who fund it. It could even reduce the overall standard of care for all in our community.
Currently 14 per cent. of the population are old-age pensioners, but by the year 2010 the figure will rise to 18 per cent. With that demographic change will come heavier demands for the care of the elderly, especially home and hospital care and community care as a whole. The Bill will assist the provision of future health care for the elderly. Fewer people will be earning a wage by the year 2010, so fewer people, through tax and national insurance, will have to carry the burden of supporting a larger number of pensioners. The Bill looks to the future and provides sensible planning to meet future needs.
The new clause is an attempt to disrupt the Government's plans—

Mr. Couchman: It is a wrecking amendment.

Mr. Hind: My hon. Friend is right; it is purely and simply a wrecking amendment. The Opposition want to make it as difficult as possible for the Government to give the elderly an opportunity to benefit from private health care. The major aspect of this wrecking amendment is the annual report by the board

distinguishing relief available in respect of certified contracts covering certified providers.
As usual, the Opposition are suffering from quangoitis. They want to set up a national body to administer the system, but to restrict the number of people who can provide health care by confining it to certified providers. The Opposition's usual tactic when they cannot defeat an argument because of its intellectual soundness is to try to wreck it by introducing unworkable practices.
The Opposition's new clauses ignore those elderly people who, when they retire, will find that it is far more costly to obtain medical insurance. I emphasise the word "insurance" because it carries with it a risk. The older one is, the greater the risk and the higher the premium—and the less likely it is that people will enter into such a contract. New clauses 4 and 10 will allow people who want private health care to invest in it if they have the means to do so, and at the same time assist the state in providing increased resources.
My experience as a constituency Member of Parliament is that many people who have enjoyed private health care all their lives find it disheartening that they cannot afford it when they grow older. The new clauses, together with the increase in the number of pensioners and other demographic changes, will not help to provide good health care for the older members of the population.
The Opposition amendment adds nothing to the Bill. It is not helpful but rather attempts to undermine the Government's proposals. I have no hesitation in saying that my right hon. Friend the Financial Secretary should see the Opposition amendment for what it is and dismiss it.

Mr. A. J. Beith: Although the hon. Member for Lancashire, West (Mr. Hind) may speak sincerely on behalf of the elderly, he allowed himself to present a series of fallacies. One is the belief that it is impossible to be in favour of private health care and opposed to the provision of tax relief as an incentive to subscribe to such care. That is manifestly not the case. Even people on the Right among those who advise the Conservative party are in favour of private health care but do not believe that the tax system should subsidise it.
Similarly, it is not the case that we welcome the clause. The Social Services Select Committee, which has a majority of Conservative Members, commented in its fifth report:
In our judgment, the creation of new tax subsidy on private health insurance cannot be demonstrated to extend total availability of health care. It would reduce the total public expenditure from which Health Service resources are drawn while at the same time narrowing the tax base still further.
There are many critics of the Government's proposals in all parts of the House, and the authorship of those proposals is the subject of some discussion and dispute. To me, they are the Dulwich clauses, based on the Prime Minister's concept of retirement and of how she and her husband will be able to provide for their own. The clauses are not based on the perspectives of most ordinary people, on how they must provide for retirement, and on their dependence on a properly funded National Health Service.
The vast majority of people depend on a properly funded Health Service. If any money is available for health care, they want to see it invested in the Health Service, yet


at the time when the NHS is under considerable pressure the public can see money being diverted to subsidise those who are able to take advantage of private health insurance.

Mr. Nicholas Bennett: The hon. Member for Berwick-upon-Tweed (Mr. Beith), like the hon. Member for Wrexham (Dr. Marek), who has left the Chamber, speaks in vague terms about a "properly funded Health Service". Given that there has been a 40 per cent. increase in real terms in Health Service spending since 1979, what percentage increase does the hon. Gentleman think would have been appropriate, and what is his party's projection for the future?

Mr. Beith: In our last general election manifesto, we said that a 2 per cent. increase in Health Service resources is required over and above that projected to meet the immediate pressures on the service. The Social Services Committee presented its own proposals for further funding of the Health Service. The hon. Gentleman cannot go anywhere in the National Health Service without finding people who are well aware that it cannot be properly run without additional resources. If the hon. Gentleman cannot see that, he is blinding himself to the obvious.
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The resources that the Government are currently directing at the Health Service cannot keep pace with the considerable pressures that it faces, which include the increasing number of elderly people—the vast majority of whom are dependent upon the NHS—and the opportunities and demands that improving medical technology create, and of which we are all aware from our constituency case work. They all place on the Health Service a funding requirement that the hon. Member for Pembroke (Mr. Bennett) must be alone in not understanding.
Treasury Ministers in particular have some difficulty defending and explaining the proposals to which new clause 4 are directed. I am sure that in the Prime Minister's mind they are the beginning of a process whereby the private sector will be asked to bear much greater responsibility for the health of the people, based on the mistaken assumption that the private sector is capable of meeting that responsibility. I am not saying that the private sector cannot contribute to the country's health care, but it will inevitably select those activities that are most profitable and which best fit its framework. That will create even more work for the public Health Service. The more that the private sector can contribute to an increase in hip operations, for example, the more aftercare will have to be undertaken by the public service.
Treasury Ministers have moved to a different standpoint. They argue, as suggested by the hon. Member for Lancashire, West (Mr. Hind), that the clause is much more limited in scope and will assist only those elderly people who already have private health insurance and who will find it difficult to continue to meet that commitment when they reach retirement age. If that is the Government's objective, they could have drafted the clause more narrowly, which was the purpose of my earlier amendment. It is difficult for the Government to sustain that argument while maintaining the deadweight argument against other proposals.
Last night, the House debated child care and workplace nurseries. I presented an amendment to provide tax relief for workplace nurseries and for wider child care provisions. The Financial Secretary responded:
I have to reject his new clause on the grounds of cost and of its very large deadweight element … The effect of the new clause would give a large tax subsidy to people who are already making this provision."—[Official Report, 11 July 1989; Vol. 156, c. 896–97.]
That is the same argument that the Chief Secretary to the Treasury used to defend the provisions of the Bill. He commented:
In a ringfence way it will help many elderly people who wish to continue medical insurance cover on retirement but who are unable to do so because they have lost the benefit of the employer scheme."—[Official Report, 4 May 1989; Vol. 152, c. 351.]
The clause apparently exists to help people who already make provision for private health care to continue doing so. It will also benefit many who do not suffer from the particular disadvantage to which the Chief Secretary referred, of starting in an employer's scheme and then finding on retirement that they no longer benefit from the employer's contribution.
The Government cannot have it both ways. They oppose tax reliefs that have a high deadweight cost because they give a subsidy to people who are already making their own provision, and then argue that the clause's primary purpose is to give just that type of relief. That is a nonsensical argument for the Government to make, and it illustrates that Treasury Ministers are being forced to adopt the Prime Minister's baby.

Mr. Hind: Does the hon. Gentleman agree that private medical care, with tax relief for pensioners, will be a pump-priming measure that will attract greater resources into the totality of our Health Service, both public and private, and that that will not happen unless the clause is implemented? The cost of providing extra health services will otherwise fall on taxpayers overall. The clause will help to improve the standard of health care, not the reverse.

Mr. Beith: I have never heard Treasury Ministers argue that the purpose of the clause is pump priming—that its objective is to enlarge the private health sector through the use of a public tax-relief subsidy. Perhaps they will decide to introduce that argument tonight. The Financial Secretary shakes his head: clearly he does not accept the pump-priming argument. In his view, the measure will help a limited number of elderly people who have already made commitments. The right hon. Gentleman would find it difficult to extend the pump-priming argument, because he must be aware—if he were not, I suspect that the Department of Health would have made him aware—that, far from reducing the total burden on the Health Service, the legislation is likely to increase it. In so far as it has any benefit, it will leave the most expensive kinds of provision in the hands of the Health Service. The Health Service will still be picking up the tab for all the tasks that the private sector cannot perform—all the long-term care, aftercare and residential care—and possibly adding to the volume of work.

Sir William Clark: The Health Service—in other words, the taxpayer—is doing precisely that now. The scheme to provide medical care for the elderly is intended not only to help the elderly, but to take some of the burden away from the National Health


Service. It will mean more resources for the NHS, because some elderly people will take advantage of private health care.

Mr. Beith: It will not take the burden away from the NHS. It will take away staff who already do the work in the NHS—consultants who perform operations, and a work force that the NHS has trained—who will then be used to carry out a much more limited range of functions. The NHS will be left to provide aftercare for the same patients, and to care for all those for whom the private sector has made no attempt at provision.
All the publicity for private health care makes it pretty clear what cannot be obtained from it. It is obvious from a reading of that literature that the private system will be highly selective in what it offers. Many of those who work in the Health Service know full well how they could enhance the service if they had either £40 million or the much larger sums that may go into this form of tax relief in the future.
If Conservative Members really believe that the burden on the Health Service would be reduced by extensive tax relief for private care, they will not stop the pensioners; tax relief for private health care will become a general provision. I hope that the Minister will deal with that. His hon. Friends' case is that the measure will relieve the NHS of its burden so effectively that the effects will be seen most clearly where the burden is lighter. If the Minister accepts that argument, he will have to explain what further plans the Government have to extend tax relief throughout the system rather than confining it to the elderly. [Interruption.]
I hear hints that some Conservative Members may wish the Government to do that. If they took such a step—which many of us believe to be in the minds of some of their members, if not those of Treasury Ministers—they would deal a terrible blow to the Health Service and its morale. They would also convince the majority of people that they believe in a two-tier Health Service, with a private system for those who can afford it and a public system for the rest—the rest being the majority, who will be expected to accept second best. Those who work in the Health Service do not want to give second best: they are capable of, and have given, the very best, and they are entitled to the resources that they need to provide that level of service.

Mr. Couchman: I had not intended to speak, but I have listened with a growing sense of wonderment to the blind prejudice and dogma emanating from the other side of the Chamber. It was ever thus. It is worth reminding Opposition Members that it was Barbara Castle, when she was Secretary of State for Health and Social Security, who killed off paybeds in the National Health Service—no doubt with the support of every Labour Member who is present now. They would have seen them all go; and very few are left.

Mr. Tony Worthington: Will the hon. Gentleman give way?

Mr. Couchman: No, I will not give way so early in my speech.
The new clause defines a certified provider as the National Health Service, but there is little private practice

in NHS hospitals: that, of course, is the point of this wrecking measure. Subsection (2)(b)(i) goes on to give the extraordinary definition of a certifed provider as someone who will
undertake training of staff to a standard which is certified by the Department of Health to be at least comparable to that provided within the National Health Service".
What staff? Nurses? Doctors? Paramedical staff? Porters? The new clause does not say, but I think that the royal colleges, which determine the appropriate places in which training can take place, might well have something to say.
Subsection (2)(b)(ii) provides a further definition: a person who will,
when recruiting and employing staff trained within the National Health Service, make a payment to the NHS to reimburse that service for the full cost of the training provided".
Will that apply for ever? If a nurse has given 30 years of service to the NHS and, in her twilight years of nursing, decides to do some work in a private hospital, will that private hospital then have to reimburse the NHS for the full cost of her training 30 years previously? What nonsense. It is blind prejudice and dogma—but what else would one expect?
What the hon. Member for Berwick-upon-Tweed (Mr. Beith) said was not much better. He talked in a rather pejorative way abut the "Dulwich clauses". That, of course, is the kind of slogan that would appeal to the Liberals—or are they the Liberal Democrats, the Democrats or the Social and Liberal Democrats? Anyway, it would appeal to whatever party the hon. Gentleman currently supports.

Mr. Worthington: Will the hon. Gentleman give way?

Mr. Couchman: Certainly not. I have not got into my speech yet.
I said earlier, when the hon. Member for Wrexham (Dr. Marek) generously gave way to me, that it was not the rich who would primarily benefit. Many people, until they reach the age of 60 or 65, are members of private health care insurance schemes, for which they may pay under a company scheme or which may be paid for by the company. Alternatively, they may purchase individual health care insurance. When they reach the age of 60 or 65, their income drops and their ability to pay for private insurance becomes that much less. An allowance such as my right hon. Friend proposes would provide precisely the incentive that many such people need to continue paying for private health care insurance when they have retired. They have made their contribution through national insurance and income tax, and they will continue to contribute if they continue to pay income tax, as part of that tax funds the NHS. They are only being given back some of their own money.
The elderly, after all, make the heaviest use of health care generally, and private health care resources provide many of the services that enhance their quality of life—cold surgery, hip operations and so forth. It relieves pressure on the NHS at just the point where the pressure is greatest and the waiting lists are longest.
I shall have no difficulty in supporting my right hon. Friend and rejecting the silly, dogmatic ideological prejudice expressed in this new clause.

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Dr. Lewis Moonie: I had not intended to refer to the speeches of the hon. Members for Lancashire, West (Mr. Hind) and for Gillingham (Mr. Couchman), and my generally charitable nature will lead me to forbear from commenting in this instance. They may, however, wish to intervene during my speech in order to make the same idiotic points as they have already made, using the ludicrously constructed briefs that they have obviously had from the Whips Office.

Mr Hind: Will the hon. Gentleman give way?

Dr. Moonie: No, I shall not give way on that point.
This is one of the least popular and least needed measures in this Finance Bill. The Government are proposing to give a large handout from the Exchequer to suppliers of private medical care, with no requirement being placed on them to account for how the money is spent. The new clauses are a very small attempt to remedy that failure.
Let me explain the reason behind those statements. The proposed tax break will be given to individuals or their relatives, regardless of need. The intention is to encourage more people to take out private health insurance, despite the fact that there must be a large question mark over the advisability of using public funds to entice people to make such a choice, one which they have clearly been free to make up to now but which they have chosen not to make. It surely cannot be a sound use of public money to prop up an expensive and unattractive service.
Moreover, a huge deadweight cost is involved—a tax break of up to £200 a year for all those currently holding such policies who, by definition, can afford to pay the premiums and who are healthy. If they are not healthy, they will not be covered by private medical insurance. Why on earth should we be spending taxpayers' money on people who are healthy and wealthy and who are so manifestly not in need of such help?
As my hon. Friend the Member for Wrexham (Dr. Marek) has made clear, we cannot believe that the Treasury Ministers favour such a stupid move. It is against all the principles of fair taxation and also of those principles that are involved in constructing a broad tax base. Where will the money go? Health care is expensive, especially in the private sector where it is up to four to five times dearer than in the National Health Service. Premiums have risen at a fantastic rate over the last few years. They will rise even faster, now that the Government are to subsidise up to 40 per cent. of the cost. Can any Conservative Member deny that that will be the case? It has been so in every other instance where the Government have stepped in to subsidise private insurance. Instead of the money being used to benefit the individuals concerned, it will go directly or indirectly into the pockets of those who provide health care through increased premiums.
Private medicine does not pay the true costs of the service that it provides. It is not complementary to the National Health Service. It exists in a parasitic relationship with the public service, preying on its skilled staff—nurses, laboratory technicians, scientific, medical and paramedical people, to name the main areas involved. All these staff are trained within the National Health Service. Their training is paid for out of the public purse. All the staff are either in short supply or need to be

employed in much greater numbers within the National Health Service to make up for the disgraceful shortages that exist in so many areas.
The statement on community care that was made earlier today, which I welcome, will place additional pressures on the need for trained staff within the National Health Service. It is high time that the private sector showed that it feels some sense of responsibility to the service on which it preys. The new clauses would do just that.
If we look at them carefully, we see that new clause 4 provides that a register should be kept of private medical concerns which either provide training themselves or make a payment to the NHS to reimburse it for the full cost of the training of the people whom they employ. New clause 10 goes further. It stipulates that tax subsidies will be paid only to firms that do provide some form of reimbursement for the costs that have been incurred. For example, they would have to undertake staff training to a standard that is similar to or comparable with that in the National Health Service, or they would have to reimburse the National Health Service for the cost of the training that has been provided. Who could quarrel with such a reasonable proposal?

Mr. Nicholas Bennett: rose—

Dr. Moonie: Obviously the hon. Member for Pembroke (Mr. Bennett) wishes to quarrel with it.

Mr. Bennett: Given that this country employs large numbers of teachers who have been trained abroad and large numbers of nurses who were trained in other countries, is the hon. Gentleman proposing that a Labour Government, should one ever be elected, would reimburse those countries for the staff who have been trained in those countries and who work over here?

Dr. Moonie: That sounds an excellent idea, one which I could not have imagined would be thought of by the hon. Member for Pembroke, since he contributes so much nonsense to our debates on health care, as witnessed by his comments earlier this afternoon.
The new clauses are reasonable. No fair person could possibly object to them. They will ensure either that private firms which recognise their responsibilities are given fair recognition for their investment or that this subsidy from everybody else's pocket to the private sector is paid only to those who carry out their responsibilities. I commend the new clauses to the House.

Mr. Tony Baldry: The debate provides us with a useful opportunity to highlight the Labour party's inherent hostility to private medicine. Much of the debate on the National Health Service in recent months has naturally tended to concentrate upon the proposals in the White Paper "Working for Patients", supplemented by the Budget provisions that we are considering. Very little attention has consequently been paid to the Opposition's policies relating to health care.
There are two things that we know about the Opposition's health care policy, both of which are damaging. First, they would abolish private practice in medicine, something which Barbara Castle sought to do in 1966. Secondly, they would undermine the concept of competitive tendering.
It is interesting to consider what the implications of the proposals would be if private health care in Oxfordshire


were to be undermined, and also how much income private health care brings to the National Health Service. Private patient income in Oxfordshire amounts to approximately £2·5 million in this financial year. Competitive tendering will save the Oxfordshire district health authority approximately £700,000 this year.
If one combines the effect of private patient income and competitive tendering, the saving amounts to £3,200,000. If competitive tendering were to be abolished and if no private patients were to be treated within the National Health Service, as each NHS consultant costs approximately £46,000, the effect of the Opposition's proposals on Oxfordshire district health authority would be that the funding of about 96 consultants would be removed. That would be wholly negative, wholly damaging and wholly detrimental to the National Health Service, for no reason other than to satisfy Opposition dogma as to private health care and to meet the demands of certain public sector trade unions about competitive tendering.
If the Opposition ever came into office, it is important to highlight the fact that almost overnight they would considerably undermine the funding of district health authorities. The effect on one district health authority alone—Oxfordshire—would be the loss of 96 consultants.

Mr. Worthington: The major savings after privatisation have related to staff wages and staff conditions. Does the hon. Gentleman concede that, if we were to pay the staff nothing, we should be able to employ an enormous number of consultants?

Mr. Baldry: It must be for the hon. Gentleman to judge whether he really feels that that was a sensible contribution to the debate.
Competitive tendering has led to substantial savings in the National Health Service. Those savings have been and are being used for better patient care. The Opposition are blinded by ideology and trade union commitments.

Mr. Couchman: Does my hon. Friend agree that the tax allowance proposed in the Bill would generate more money than the actual saving in taxation? The figures show that two and a half to three times the amount given away will be generated in additional health care resources.

Mr. Baldry: My hon. Friend makes a very good point, which I had hoped would he taken on board much earlier in the debate. I had hoped that many of the points would be taken on board in Committee of the whole House. For many of us there is a sense of deja vu about the debate. We have covered the ground before, but it seems that the Opposition are incapable of taking on board the essential facts.

Mr. Norman Lamont: Deja non vu.

Mr. Baldry: I bow to my right hon. Friend's superior knowledge of French. Whether it is deja vu or deja non vu, the Opposition are not grasping it, so we have to take them through it yet again.
Many people have private health care as part of their remuneration package. Many employers negotiate private health care packages for their employees. Many trade unions now negotiate private health care. While those people are in employment, that private health care subscription is paid as part of their remuneration. When

they retire, not only does their income drop but their health care subscription is no longer paid for them. That is nonsense. The provision in the Finance Bill encourages those who have medical insurance cover during their working lives to continue it in retirement. That is a perfectly straightforward provision. Many people in group schemes when their employers negotiate insurance cover for their employees could keep that cover, given some fiscal encouragement.
The Opposition have said on a number of occasions that that encouragement will simply go to those who are better off. That canard should be dismissed at every opportunity. About 5·5 million people—or one in 10 of the population—are now covered by medical insurance schemes, many of them through company or trade union schemes. The great majority of the tax relief that the provision would produce would go to standard rate taxpayers. About 80 per cent. of the provision would go to basic rate taxpayers aged over 60 or to those who are not liable to tax. The benefit of the provision will go mainly to those who have worked throughout their lives, and whose employers paid into a medical insurance scheme, and will enable them to continue that scheme into retirement.

Dr. Moonie: Will the hon. Gentleman tell us how many people he knows who pay no tax but could pay £600 a year in private medical insurance? I should dearly like to know.

Mr. Nigel Griffiths: Ken Dodd.

Mr. Baldry: I hope that the hon. Gentleman accepts the general thrust of my point, that the provision will not affect primarily the higher rate taxpayer, as the Opposition have suggested, but will go to those paying the basic rate. The humorous interventions from the Opposition demonstrate that the Government and the Conservative party have won the intellectual argument. Clearly they are now finding it difficult to make any points of substance against this perfectly sensible provision. The Opposition have to make it clear to the country exactly where they stand on private medicine.
6.15 pm
If one in 10 people now benefit from private medical insurance schemes, and if whole groups of employees throughout the country benefit from private medical schemes, what do the Opposition intend to do for them? Do they intend to revert to the position under Barbara Castle, when private medical health care was forced out of the National Health Service and consequently a number of private hospitals were set up so that the benefits of that did not go to the National Health Service? What is intended? There is no doubt that private medical care makes a considerable contribution to health care in Britain. It relieves pressure on the National Health Service and increases scope for co-operation between the National Health Service and the independent sector.

Dr. Moonie: What evidence is there of that?

Mr. Baldry: The hon. Gentleman asks what evidence there is for private medicine relieving pressure on the National Health Service. I am not sure where he goes, but certainly in Oxfordshire a considerable amount of screening is carried out by the independent sector which, by definition, relieves pressure on the National Health Service. If my constituent, Mrs. Jones, can be screened privately more quickly than she could by the National


Health Service, and consequently the National Health Service can fulfil its screening targets much more quickly, that will have relieved pressure on the National Health Service. If the Opposition cannot grasp that or understand how the private sector can contribute to enhancing standards in the National Health Service, I weep, as clearly they have a total lack of understanding of how the National Health Service operates.

Dr. Moonie: Will the hon. Gentleman explain the possible economic benefit to a country with a public health service to spend four times as much on providing the service privately? Is he aware of the least-cost approach to analysing expenditure? How can he possibly justify spending that amount of money?

Mr. Baldry: That intervention begs a number of questions. It begs the question whether the National Health Service inviting the private sector to work for it costs four times as much. Often, taking into account all the costs, the independent sector is cheaper. That is one reason why the National Health Service and district authorities have been inspired and have the incentive to look to the independent sector. The independent sector can often deliver services such as screening and ancillary services more cost-effectively than the National Health Service can.

Mr. Jeremy Hanley: Does my hon. Friend agree that it is irrefutable that the major pressure on the Health Service is the growing number of elderly people, who, quite rightly, turn to the National Health Service? Many of the people who will benefit by the provision will already use private medicine, and because of the withdrawal of tax benefits through their firm will automatically have to turn to the National Health Service when they retire. They will be new patients for the National Health Service; therefore, the provision would be of great benefit in reducing pressure on the Health Service.

Mr. Baldry: My hon. Friend is right. It is incredible that the Opposition find it so difficult to understand that point. Of course, all the money that comes into the independent sector of private medicine is—

Dr. Moonie: It is wasted.

Mr. Baldry: It is not wasted. It is extra money for health services in this country as a whole. This year, in Oxfordshire alone, £2·5 million extra is going into the Health Service because of private medicine by way of fees to Oxfordshire district health authority. In addition to those direct contributions there is the money that the National Health Service saves because people who might otherwise go into NHS hospitals are treated by private or independent hospitals elsewhere. The private sector's contribution to health care overall is considerable.
I understand that the Opposition are saying that they do not believe that there is a place for private medicine or independent health care. I hope that they will explain that clearly throughout the land, so that each district health authority can note the impact that that would have on their financing. Taking just competitive tendering and private health care in my district health authority, it is the equivalent of 96 consultant posts.

Dr. Moonie: I am grateful to the hon. Gentleman for giving way to me again. I appreciate that I have intervened twice already. He has twice mentioned the method of tendering and the money coming from private medicine. Is

he aware that the money raised from competitive tendering is taken into account and that the Government have calculated the extra money that the health board should get in the following financial year? Surely the hon. Gentleman is not suggesting that the £2·5 million to provide private medical treatment all goes in as extra money. That would be nonsense. About 95 per cent. goes into the costs of administration and the treatment of that group of patients.

Mr. Baldry: The hon. Gentleman is wrong about competitive tendering. On occasions too numerous to particularise, Secretaries of State for Health have made it clear that the moneys raised by district health authorities and saved by competitive tendering redound to their credit. That has certainly happened in Oxfordshire and in every other district health authority. The money raised by private health care—£2·5 million in Oxfordshire this year—is money that would otherwise not go into the district health authority's coffers. If one removes the potential for the district health authority to treat private patients, that £2·5 million will no longer go into those coffers.
We have demonstrated beyond peradventure two points about the Opposition. First, they have no intellectual arguments with which they can challenge this sensible provision. Their general hilarity and levity are testimony to the fact that they have run out of sound arguments. Secondly, the Opposition have a continuing and inherent antipathy towards private medicine. Much of their opposition to these provisions, such as it is, is born of their opposition to private health care. They do not understand that, despite their protestations, there is already a growing partnership between the NHS and the independent sector. Through our reforms, that partnership will open up further opportunities for the public and private sectors to work together to provide services for each other, sharing the use and spreading the cost of expensive hospital facilities. That will redound to the benefit of NHS patients and health care as a whole.
I hope that the House will pass these provisions, which will enable those who have had medical insurance until retirement to continue with it into pensionable age. I am sure that in five or six years' time we will see that they are continuing to be of considerable benefit to health care.

Mr. Worthington: The provision to which new clause 4 responds is part of the Government's long-term consistent attack on the Health Service. Conservative Members have made several interventions, saying that it is not the Government's intention to attack or undermine the NHS, but we cannot take consolation from that. We know that the Prime Minister takes her principal intellectual support in the Tory party from those who believe that Socialism should be driven out of this country, and the NHS is the prime example of successful Socialism.
Some Conservative Members do not believe in the post-war consensus that part of the rights of citizenship should be access to the best possible health care, regardless of issues such as class, income, age, gender or ethnic origin. We want to defend that belief. This provision, giving tax relief for private medical insurance, is but a small part of the larger attack that is being mounted against the NHS. The NHS should give us a universal right to a comprehensive range of services of the best quality.
There is a fundamental division between the Opposition and the Government. Why would people invest in a


private medical sector unless it were better? There are no grounds for selling a private medical service unless it is better. Imagine going to a consultant who said, "On the one hand, you can have an operation on the NHS and it will be available in two weeks. On the other, we can offer you an operation in the private sector and it will be available in six months' time." Would people like to have that service in six months' time? Of course not. The success of the private health market depends on being able to offer something better—especially reduced waiting times—than the NHS.
It is clear that the Government are stimulating the private health sector so that the comparisons between it and the NHS become increasingly invidious. The intellectual justification for the NHS will become increasingly weaker and people will withdraw their support from it.

Mr. John Butterfill: Does the hon. Gentleman accept that in some cases—I can cite cases in my constituency—the delay time for certain disciplines is identical in the NHS and the private sector, but the advantage for the person who buys private treatment is that he can specify the date more precisely? For those who need a precise date, it may be worth paying the money.

Mr. Worthington: I have no alternative but to accept the hon. Gentleman's assurance. If that were the normal pattern of relationships between the private sector and the NHS, the prospect for private medicine would be grim. That is not the position. There are long waiting lists for some NHS operations.
Let us nail one myth. We are not talking about two separate services—a private sector and a National Health Service—but about services that are intertwined. A consultant may operate on a patient in the NHS or the private sector. National Health Service premises provide the opportunity for the private sector to lay out its market stall so that the private consultant can say that if one stays with the NHS the wait will be six months, but if one goes into the private sector the wait will be two weeks. It is strange that an employee of the NHS can increase his income by being able to sell his private services on NHS time.

Mr. Couchman: I am grateful to the hon. Gentleman for giving way. He is more gracious than 1 was to him.
Is the hon. Gentleman deprecating the fact that some NHS doctors who are not contracted full time to the NHS operate outside the NHS in private hospitals? Has he chapter and verse of anyone who has had a six-month wait for an operation on the NHS, but has been offered an operation tomorrow if he goes into a private hospital?

Mr. Worthington: Every hon. Member has chapter and verse on that because constituents constantly come to our surgeries—a fortunate use of the word in this case—and tell us what has happened to, for example, their children. I can give an example of the condition of glue ear. The consultant said that he could deal with the case within a fortnight if the child became a private patient, but that he regretted to say that if the child simply went on the NHS list there would be a wait of several months. If there is a single hon. Member who cannot give chapter and verse on

that constantly occurring, he is not in touch with his constituency, because such cases happen repeatedly. In effect, one goes to see an NHS consultant sitting at an NHS desk, who can sell another product while being employed by the NHS. It is a strange relationship in which one's primary loyalty is not to one's major employer.
Undoubtedly, the major inspiration for this provision came from the Prime Minister, and I cannot see Treasury Ministers denying that. The Prime Minister is ignoring one of her basic principles—that one should not fiddle the market place to subsidise private industry. The Opposition have asked frequently for help for firms in particular constituencies, but hon. Members are told that the Government will not support lame ducks or subsidise firms that cannot stand up in the market place. Yet now it seems to be acceptable for public money to be used to support private health care.
I want to ask a question which will be asked by many others who will be paying, even if only in a small way, extra taxes because of this concession. Why should I? What are the principles by which those people who choose not to have private insurance or who cannot afford to do so have to subsidise this tax concession? Why has this tax concession been singled out? We all know that many people pay taxes and, as their income increases, lose benefits. In effect, they are being taxed at 80 per cent. They should be a priority. One would also have thought that the priority was to strengthen the NHS, but the Government say, "No, this concession is the priority." They say that this is how they want to use our money. How can that be justified?

Mr. Hind: Does the hon. Gentleman accept that if there is tax relief of 25 per cent., or of 40 per cent. for elderly people, for every £25 in tax relief, the pensioners themselves are paying £75? That £75 would not be put into health care. What would happen is that the state would have merely the £25. We are increasing the volume of the gross national product going into health care. That must be a good thing.

Mr. Worthington: I am afraid that I did not hear the hon. Gentleman's entire point because a more urgent message arrived in the middle of his contribution. I hope that I can deal with his point in the remainder of my speech.
The essential point is whether the private sector strengthens the NHS. The Government and Conservative Members say that it does. If that is so, why do they not commission research to see whether the relationship between the NHS and the private sector is complementary or parasitic? I can tell Conservative Members that the Government have commissioned such research. I asked whether they had and I received a reply that they had commissioned research from the university of Sheffield. Because of the lack of time I must go through the conclusions quickly, but the study shows that, in terms of doctors and nurses, any further expansion of the private health sector will be achieved only by arresting or reversing the development of the NHS. It states that, with the present level of private activity,
It is difficult to see how in the short term private sector activity could increase further without NHS consultants doing more work outside the normal working week, which may have consequences for the cost of treatment, or without many full time consultants switching to part time work, thereby reducing their NHS caseload.


The nursing pool is finite and will be under great pressure in the future.
I do not have time to quote the research in full, but if the Minister wants to look at it, he will see that it is clear that further expansion of the private health care sector will be damaging to the NHS. This proposal is part of that damage.

Mr. Nicholas Bennett: One of the canons of taxation in which I believe most firmly is that the taxation system should be as simple as possible so that it can be well understood by those who pay tax. I am not normally in favour of increasing the number of tax reliefs available, but I have noted that the White Paper on public expenditure said that tax reliefs can be justified on two grounds—first, encouraging savings and home ownership and, secondly, encouraging enterprise and training to make the economy more efficient. I believe that there should be a third category for which tax relief should be available as a matter of public policy; to increase personal responsibility and encourage people to look after themselves as much as possible. It can be allied with the principle of tax relief for home ownership. It is, in itself, a good principle that people should own their homes and look after themselves as much as possible.
That category applies also to private health insurance. It is a basic principle that it should be public policy to encourage people to help themselves as much as possible, especially when they reach an age at which they would normally find it more difficult to help themselves.
I also believe that tax relief for those aged 60 and over is important because it extends their range of choice. That is a vital argument in its favour. I do not like the idea, regularly expressed by Opposition Members, that we must restrict choice and prevent the staff from working in the private sector and patients from having an alternative to state-provided medicine.

Mr. Dennis Turner: Will the hon. Gentleman give way?

Mr. Bennett: I am sorry, but the winding-up speeches are about to start and I have only a few minutes in which to speak.
Thirdly, I believe that those who help themselves by paying twice should enjoy some form of relief to compensate them for the fact that they are not only paying for the state-provided service but are providing for themselves in the private service. As my hon. Friend the Member for Lancashire, West (Mr. Hind) said, by encouraging people to take up this tax relief we shall increase the total amount available for Health Service spending. We can increase the total amount spent on health not only by increasing the contribution to the state sector, but by increasing the total sum available to the private sector. We must take advantage of that opportunity. Other countries in Europe do not spend much more on the state sector but they do spend much more on private sector health insurance.
Fourthly, those who use private facilities are thus relieving the National Health Service of demand, especially in the case of operations such as hip replacements which are of special benefit to the elderly. If hip operations are performed in the private sector, the National Health Service can concentrate on the more technically difficult operations. That will remove much of the day-to-day surgery from the NHS. The proposal

would also increase co-operation between the private and nationalised sectors of the Health Service, and that is important.
Even with tax relief, those who pay for private insurance are still making a contribution on top of the contribution that they make as taxpayers. We should remember that. It is depressing that the Opposition should talk about handouts and giveaways and that they should fail to recognise that we are talking about relief on money that people have already earned and on which they have paid tax. The hon. Member for Wrexham (Dr. Marek) could not define what he meant by super super rich, super rich, rich or even poor when I asked him to do so.
Finally, it is rather depressing that the Liberal party, which has such a long tradition of pluralism and has long believed that people should have a choice and that there should be a private sector, have now reached the point at which they believe that people should not be able to choose the private sector and that the state must control the entire Health Service provision. No wonder that, having abandoned their philosophy, the Liberals have now abandoned their name.

Mr. Calum Macdonald: Because of the pressure of time, I have had to throw away the speech that I intended to make. Instead, I shall rely on the words of the Financial Secretary himself, who last night advanced the most cogent argument against the tax allowance for private medical insurance. Last night, of course, the right hon. Gentleman was arguing against a tax allowance in respect of children. So persuaded was I by his argument that I refrained from voting, although I understood and sympathised with the motives of those who argued the case for new clause 23.
The Financial Secretary's arguments on that occasion are entirely applicable to this tax relief—perhaps even more so. The Financial Secretary will correct me if I misquote him. I was so struck by what he said that I took the trouble of writing it down. In rejecting the case for the new clause, he said:
Governments have to choose in a world of limited resources. The Government were right to decide to deploy resources more to help families in greatest need."—[Official Report, 11 July 1989; Vol. 156.]
If that is true, this tax allowance is certainly not an example of the Government deploying resources to the people in greatest need.
6.45 pm
The Financial Secretary said that he was concerned to do something for people at the bottom end of the scale. If that is the Government's objective, they will certainly not achieve it through this tax relief. Most strikingly, the Financial Secretary rejected a child tax allowance because he said that it would be of no help to the 25 per cent. of families who did not pay tax. How, then, can the right hon. Gentleman justify a tax allowance that will be of no help to the two thirds of pensioners who pay no income tax? His argument is entirely inconsistent.
The Financial Secretary concluded his attack on new clause 23 by describing in some detail how such an allowance would be terribly regressive in its impact. He said that those paying tax at the higher rate would gain much more than those paying at the basic rate. That would also be true of the allowance that the Government are trying to push through. The Financial Secretary said that


such a regressive allowance would be difficult to justify, and it seems to me that his words were the epitaph of this allowance.

Mr. Norman Lamont: So far in the course of our proceedings on this year's Finance Bill we have not heard tirades about the super-rich from the hon. Member for Wrexham (Dr. Marek), but tonight he has reverted to form and type, although even when pressed by my hon. Friend the Member for Pembroke (Mr. Bennett) he refused to say who he thought were the super-rich, except that he thought that they were a few people who had money in the bank. The hon. Gentleman thinks that the super-rich are people who have access to private medical insurance. That means that there are apparently 5½ million super-rich among the working population and 600,000 pensioners who are super-rich. I find it extraordinary that the hon. Member should maintain that this was a tax relief that would benefit only the very well-off.
It is time that the hon. Gentleman forgot about the super-rich. In our final debate on last year's Finance Bill the hon. Gentleman paraded a book called "The Super Rich", which had an art deco cover and was published 50 years ago. The hon. Gentleman's political ideas are no more up to date than his rhetoric.
The hon. Members for Wrexham and for Western Isles (Mr. Macdonald) seemed wholly unaware that the scheme to encourage elderly people to take out private medical insurance is technically available to non-taxpayers because it operates on the same basis as MIRAS. That is an important point of equity. Of course, we do not expect it to be widely used in that way, but it is an important point of principle and it was quite wrong for Opposition Members to misrepresent the tax relief, which is, indeed, available to non-taxpayers. A more important point, of course, is that we expect no less than 80 per cent. of the beneficiaries of the scheme to be basic rate taxpayers, who can hardly be classed as super-rich.
The main argument advanced by the hon. Member for Wrexham was that the relief was not targeted, but the whole point of the proposal is to generate additional subscriptions. We want to involve more people in private health insurance so that—as my hon. Friend the Member for Lancashire, West (Mr. Hind) said—we can get more resources into health care as a whole, both public and private.
The hon. Member for Berwick-upon-Tweed (Mr. Beith) referred to what I had said about the deadweight effect of the relief that he proposed. Of course, we should not have proposed this tax relief if we thought that it would have a purely deadweight effect in the long term. Although it will have a deadweight cost for a year or two, over time the relief would act as an incentive and would generate more subscriptions and thus bring more resources into health care. That is the whole purpose of the relief—to generate more resources and therefore, as my hon. Friend the Member for Banbury (Mr. Baldry) said, to relieve pressure on the National Health Service.
My hon. Friend the Member for Banbury was asked what evidence there is that people using the private sector will relieve pressure on the National Health Service. It seemed a strange question, but my hon. Friend gave a good answer by saying that, by definition, a person who uses the private sector for a certain treatment is not using

the National Health Service for that treatment at that moment, and is actually saving and releasing resources that can be used by other people.
The strangest intervention in the debate came from the hon. Member for Berwick-on-Tweed. He said that one of the consequences of this relief would be to add to the pressures on the National Health Service. His reason was that, if people had acute operations or hip operations, they would be in good health—the implication seemed to be that they would live longer—and might require after-care and more attention from the National Health Service. That is a strange argument. It is totally inconsistent with what the hon. Gentleman has always said—that we should put more resources into the National Health Service. That also causes people to live longer and to add to pressure on the Health Service. Apparently, it is legitimate and permissible to live longer if we do it on the National Health Service, but not if we do so in the private sector. That seems to be the hon. Gentleman's argument.
This is a limited and targeted relief. It is targeted to help the elderly and to help people when private health insurance premiums rise. That is the sense in which it is targeted.

Mr. Turner: The Financial Secretary is telling us that this measure is targeted at the elderly. He said that 600,000 elderly people will benefit from it. What about the other 10 million pensioners in this country? In my constituency we are closing down 127 beds. Seriously ill people cannot get into Health Service hospitals. How can we possibly justify spending £40 million or up to £200 million when we are closing beds? Many of the seriously ill people who are not admitted to hospital will be elderly people who are not paying income tax. Again, that is the redistribution of wealth from the poor to the rich.

Mr. Lamont: It would, of course, be possible to spend all the money in the public expenditure round each year on the National Health Service. I am quite sure that, even if we did that, hon. Members would say that the demand for medical care in their constituencies was unsatisfied. The demand for medical care is probably infinite. The £40 million represented by this tax relief is 0·2 per cent. of the increase in expenditure in the Health Service this year, and it is 0·15 per cent. of expenditure in the Health Service in total. It really is a small amount of money, and it is a modest tax relief.
My hon. Friend the Member for Lancashire, West made a good point when he said that, after all, this is a pump-priming exercise. Every £25 that is spent by a basic ratepayer generates £75 of his own money as well. If he is a higher ratepayer, every pound that he gets in tax relief has to be matched by two and a half times that amount of money from his own pocket. As my hon. Friend the Member for Lancashire, West said, this is definitely a way of getting more resources into the Health Service.

Dr. Moonie: Will the hon. Gentleman give way?

Mr. Lamont: I will not give way. I must get on.
The hon. Member for Kirkcaldy (Dr. Moonie) said that the private sector is more expensive. It is extremely difficult to compare National Health Service costs with private sector costs. I am not sure whether one is comparing like with like. It would be surprising if, to some extent, the private sector did not have higher costs. Insurance companies have administration and marketing costs. The


real comparison is not with an insurance company, with all its overheads, but between a private sector hospital and a National Health Service hospital. If one wanted to make the sort of comparisons that Opposition Members have been making, one should add in more state administration costs such as the cost of administering the collection of taxes, administering the Inland Revenue, Customs and Excise, and so on. Perhaps even the salary of the Government broker in the Department for National Savings should also be added.
The new clause is a wrecking clause. It is designed simply to make the scheme non-operational. We believe in a partnership between the private and public sectors. The modest tax relief in the Bill will help to generate more resources and relieve pressure on the National Health Service, and I urge my right hon. and hon. Friends to reject the new clause.

Dr. Marek: We have had a good debate. I am particularly grateful to my hon. Friends the Members for Clydebank and Milngavie (Mr. Worthington), for Kirkcaldy (Dr. Moonie) and for Western Isles (Mr. Macdonald) for making all the pertinent points that the Opposition would wish to make in defending and advocating the new clause.
To some extent, the Government have come clean. The Financial Secretary has at last admitted that private medical insurance is pump priming, that it is not a matter of the subsidy being £40 million. If, as he says, it generates new private money into the Health Service, more and more people will take out medical insurance and more and more people will thereby be given tax handouts. Therefore, the estimated £40 million loss to the Treasury will probably be wide of the mark, and the Opposition's £200 million estimate will be nearer the mark. The Financial Secretary said that it is essentially an open-ended commitment.
The Government cannot have it both ways. They say that the measure will generate more resources for the Health Service, but the Financial Secretary says that all the money in the public expenditure round each year can be spent on the Health Service. There is an inconsistency.

Mr. Norman Lamont: indicated dissent.

Dr. Marek: The Financial Secretary is shaking his head. In a perfect world in which there is enough money and in which the National Health Service is absolutely provided for, he would be right, but we are not in a perfect world. The National Health Service is desperately short of money.
Conservative Members are not putting more money into the Health Service; they are buying privilege and choice at the expense of others who are not in a position to pay for privilege and choice. That is the essential difference between the Conservative and Labour parties. Of course some people are prepared to pay for that choice. The Government will give them that opportunity, and the Opposition can only table a clause to restrain some of the wilder excesses of the tax advantages that will go to people who do not need them. There is no incentive. It is right for the Financial Secretary to say that 80 per cent. of taxpayers will take advantage of it, but that is because only 2·6 per cent. of pensioners pay at the higher rates. I bet that 80 per cent. of the 2·6 per cent. of higher rate taypayers will also contribute and take advantage of these handouts.

Dr. Moonie: Before my hon. Friend leaves the absurdity of the Financial Secretary's statements, will he comment on the one in which he tried to equate spending on health insurance with spending on health care?

Dr. Marek: My hon. Friend makes a valid point, but I am afraid that the time forbids me to develop it.
The issue is clear. Although Conservative Members do not say so, their arguments that are based on more money for the Health Service have an extra facet. People who can take advantage of the provisions are, in effect, saying, "Yes, but we want choice and privilege and a better service than other people who do not have even the possibility of paying for treatment." It is on that basis that we have tabled our new clause, which we commend to the House.

Question put, That the clause be read a Second time:—

The House divided: Ayes 207, Noes 267.

Division No. 295]
[16.59 pm


AYES


Abbott, Ms Diane
Fields, Terry (L'pool B G'n)


Allen, Graham
Flannery, Martin


Alton, David
Flynn, Paul


Anderson, Donald
Foot, Rt Hon Michael


Archer, Rt Hon Peter
Foster, Derek


Ashton, Joe
Foulkes, George


Barnes, Harry (Derbyshire NE)
Fraser, John


Barnes, Mrs Rosie (Greenwich)
Fyfe, Maria


Beckett, Margaret
Galbraith, Sam


Beith, A. J.
Garrett, John (Norwich South)


Bennett, A. F. (D'nt'n &amp; R'dish)
Gilbert, Rt Hon Dr John


Bermingham, Gerald
Godman, Dr Norman A.


Bidwell, Sydney
Golding, Mrs Llin


Blair, Tony
Gould, Bryan


Blunkett, David
Graham, Thomas


Boateng, Paul
Grant, Bernie (Tottenham)


Boyes, Roland
Griffiths, Nigel (Edinburgh S)


Bradley, Keith
Griffiths, Win (Bridgend)


Bray, Dr Jeremy
Grocott, Bruce


Brown, Nicholas (Newcastle E)
Hardy, Peter


Brown, Ron (Edinburgh Leith)
Harman, Ms Harriet


Bruce, Malcolm (Gordon)
Hattersley, Rt Hon Roy


Buckley, George J.
Haynes, Frank


Callaghan, Jim
Heffer, Eric S.


Campbell, Menzies (Fife NE)
Henderson, Doug


Campbell, Ron (Blyth Valley)
Hinchliffe, David


Carlile, Alex (Mont'g)
Hoey, Ms Kate (Vauxhall)


Cartwright, John
Home Robertson, John


Clark, Dr David (S Shields)
Hood, Jimmy


Clarke, Tom (Monklands W)
Howarth, George (Knowsley N)


Clay, Bob
Howell, Rt Hon D. (S'heath)


Clelland, David
Howells, Geraint


Clwyd, Mrs Ann
Hoyle, Doug


Cohen, Harry
Hughes, John (Coventry NE)


Cook, Frank (Stockton N)
Hughes, Robert (Aberdeen N)


Cook, Robin (Livingston)
Hughes, Roy (Newport E)


Corbyn, Jeremy
Hughes, Simon (Southwark)


Cousins, Jim
Illsley, Eric


Cryer, Bob
Ingram, Adam


Cummings, John
Janner, Greville


Cunliffe, Lawrence
Jones, Barry (Alyn &amp; Deeside)


Cunningham, Dr John
Jones, Ieuan (Ynys Môn)


Dalyell, Tam
Jones, Martyn (Clwyd S W)


Darling, Alistair
Kaufman, Rt Hon Gerald


Davies, Rt Hon Denzil (Llanelli)
Kennedy, Charles


Davies, Ron (Caerphilly)
Kinnock, Rt Hon Neil


Davis, Terry (B'ham Hodge H'I)
Kirkwood, Archy


Dewar, Donald
Lambie, David


Dixon, Don
Lamond, James


Dobson, Frank
Leadbitter, Ted


Doran, Frank
Lestor, Joan (Eccles)


Dunnachie, Jimmy
Lewis, Terry


Dunwoody, Hon Mrs Gwyneth
Litherland, Robert


Eadie, Alexander
Livingstone, Ken


Ewing, Mrs Margaret (Moray)
Livsey, Richard


Fearn, Ronald
Lloyd, Tony (Stretford)


Field, Frank (Birkenhead)
Lofthouse, Geoffrey






Loyden, Eddie
Richardson, Jo


McAllion, John
Roberts, Allan (Bootle)


McAvoy, Thomas
Robertson, George


McCartney, Ian
Robinson, Geoffrey


Macdonald, Calum A.
Rogers, Allan


McFall, John
Rooker, Jeff


McKay, Allen (Barnsley West)
Ross, Ernie (Dundee W)


McKelvey, William
Rowlands, Ted


McLeish, Henry
Ruddock, Joan


Maclennan, Robert
Sedgemore, Brian


McNamara, Kevin
Sheldon, Rt Hon Robert


Madden, Max
Shore, Rt Hon Peter


Mahon, Mrs Alice
Short, Clare


Mallon, Seamus
Skinner, Dennis


Marek, Dr John
Smith, Andrew (Oxford E)


Marshall, David (Shettleston)
Smith, C. (Isl'ton &amp; F'bury)


Marshall, Jim (Leicester S)
Smith, Rt Hon J. (Monk'ds E)


Martin, Michael J. (Springburn)
Smith, J. P. (Vale of Glam)


Martlew, Eric
Soley, Clive


Maxton, John
Spearing, Nigel


Meacher, Michael
Steel, Rt Hon David


Meale, Alan
Steinberg, Gerry


Michael, Alun
Stott, Roger


Michie, Bill (Sheffield Heeley)
Strang, Gavin


Michie, Mrs Ray (Arg'l &amp; Bute)
Straw, Jack


Mitchell, Austin (G't Grimsby)
Taylor, Mrs Ann (Dewsbury)


Moonie, Dr Lewis
Taylor, Matthew (Truro)


Morgan, Rhodri
Thompson, Jack (Wansbeck)


Morley, Elliott
Turner, Dennis


Morris, Rt Hon A. (W'shawe)
Vaz, Keith


Mowlam, Marjorie
Wall, Pat


Mullin, Chris
Wallace, James


Murphy, Paul
Walley, Joan


Oakes, Rt Hon Gordon
Wareing, Robert N.


O'Brien, William
Watson, Mike (Glasgow, C)


Orme, Rt Hon Stanley
Welsh, Michael (Doncaster N)


Parry, Robert
Wigley, Dafydd


Patchett, Terry
Williams, Alan W. (Carm'then)


Pendry, Tom
Wilson, Brian


Pike, Peter L.
Winnick, David


Powell, Ray (Ogmore)
Wise, Mrs Audrey


Prescott, John
Worthington, Tony


Primarolo, Dawn
Wray, Jimmy


Quin, Ms Joyce
Young, David (Bolton SE)


Radice, Giles



Randall, Stuart
Tellers for the Ayes:


Redmond, Martin
Mr. Allen Adams and


Rees, Rt Hon Merlyn
Mr. Ken Eastham.


Reid, Dr John



NOES


Adley, Robert
Bottomley, Mrs Virginia


Aitken, Jonathan
Bowden, A (Brighton K'pto'n)


Alexander, Richard
Bowden, Gerald (Dulwich)


Alison, Rt Hon Michael
Bowis, John


Allason, Rupert
Boyson, Rt Hon Dr Sir Rhodes


Amess, David
Braine, Rt Hon Sir Bernard


Amos, Alan
Brandon-Bravo, Martin


Arbuthnot, James
Brazier, Julian


Arnold, Jacques (Gravesham)
Brooke, Rt Hon Peter


Ashby, David
Brown, Michael (Brigg &amp; Cl't's)


Aspinwall, Jack
Browne, John (Winchester)


Atkins, Robert
Bruce, Ian (Dorset South)


Baker, Rt Hon K. (Mole Valley)
Buck, Sir Antony


Baker, Nicholas (Dorset N)
Budgen, Nicholas


Baldry, Tony
Burns, Simon


Banks, Robert (Harrogate)
Burt, Alistair


Batiste, Spencer
Butcher, John


Beaumont-Dark, Anthony
Butler, Chris


Bellingham, Henry
Butterfill, John


Bendall, Vivian
Carlisle, John, (Luton N)


Bennett, Nicholas (Pembroke)
Carlisle, Kenneth (Lincoln)


Bevan, David Gilroy
Carrington, Matthew


Biffen, Rt Hon John
Carttiss, Michael


Blackburn, Dr John G.
Cash, William


Body, Sir Richard
Chalker, Rt Hon Mrs Lynda


Bonsor, Sir Nicholas
Channon, Rt Hon Paul


Boscawen, Hon Robert
Chapman, Sydney


Boswell, Tim
Chope, Christopher


Bottomley, Peter
Clark, Dr Michael (Rochford)





Clark, Sir W. (Croydon S)
Irvine, Michael


Clarke, Rt Hon K. (Rushcliffe)
Irving, Charles


Colvin, Michael
Jack, Michael


Conway, Derek
Janman, Tim


Coombs, Anthony (Wyre F'rest)
Jessel, Toby


Coombs, Simon (Swindon)
Jones, Gwilym (Cardiff N)


Cope, Rt Hon John
Jones, Robert B (Herts W)


Couchman, James
Key, Robert


Cran, James
Kilfedder, James


Critchley, Julian
King, Roger (B'ham N'thfield)


Currie, Mrs Edwina
Knapman, Roger


Curry, David
Knight, Greg (Derby North)


Davies, Q. (Stamf'd &amp; Spald'g)
Knowles, Michael


Davis, David (Boothferry)
Knox, David


Day, Stephen
Lamont, Rt Hon Norman


Devlin, Tim
Lang, Ian


Dicks, Terry
Latham, Michael


Dorrell, Stephen
Lawrence, Ivan


Douglas-Hamilton, Lord James
Lawson, Rt Hon Nigel


Dover, Den
Lee, John (Pendle)


Durant, Tony
Leigh, Edward (Gainsbor'gh)


Dykes, Hugh
Lennox-Boyd, Hon Mark


Eggar, Tim
Lester, Jim (Broxtowe)


Emery, Sir Peter
Lightbown, David


Evans, David (Welwyn Hatf'd)
Lilley, Peter


Evennett, David
Lloyd, Sir Ian (Havant)


Fairbairn, Sir Nicholas
Lloyd, Peter (Fareham)


Fallon, Michael
Lord, Michael


Field, Barry (Isle of Wight)
Macfarlane, Sir Neil


Finsberg, Sir Geoffrey
MacGregor, Rt Hon John


Fishburn, John Dudley
MacKay, Andrew (E Berkshire)


Fookes, Dame Janet
McLoughlin, Patrick


Forman, Nigel
McNair-Wilson, Sir Michael


Forsyth, Michael (Stirling)
McNair-Wilson, Sir Patrick


Forth, Eric
Major, Rt Hon John


Fowler, Rt Hon Norman
Malins, Humfrey


Franks, Cecil
Mans, Keith


Freeman, Roger
Maples, John


French, Douglas
Marland, Paul


Gale, Roger
Marlow, Tony


Gardiner, George
Marshall, John (Hendon S)


Garel-Jones, Tristan
Marshall, Michael (Arundel)


Gill, Christopher
Martin, David (Portsmouth S)


Glyn, Dr Alan
Mawhinney, Dr Brian


Goodson-Wickes, Dr Charles
Maxwell-Hyslop, Robin


Gorman, Mrs Teresa
Mayhew, Rt Hon Sir Patrick


Gow, Ian
Mellor, David


Grant, Sir Anthony (CambsSW)
Miller, Sir Hal


Greenway, Harry (Ealing N)
Mills, Iain


Greenway, John (Ryedale)
Mitchell, Andrew (Gedling)


Gregory, Conal
Mitchell, Sir David


Griffiths, Sir Eldon (Bury St E')
Montgomery, Sir Fergus


Griffiths, Peter (Portsmouth N)
Moore, Rt Hon John


Ground, Patrick
Morris, M (N'hampton S)


Hague, William
Moss, Malcolm


Hamilton, Neil (Tatton)
Moynihan, Hon Colin


Hampson, Dr Keith
Mudd, David


Hanley, Jeremy
Neale, Gerrard


Hannam, John
Needham, Richard


Hargreaves, A. (B'ham H'll Gr')
Neubert, Michael


Hargreaves, Ken (Hyndburn)
Newton, Rt Hon Tony


Harris, David
Nicholls, Patrick


Haselhurst, Alan
Nicholson, David (Taunton)


Hawkins, Christopher
Nicholson, Emma (Devon West)


Hayes, Jerry
Norris, Steve


Hayhoe, Rt Hon Sir Barney
Onslow, Rt Hon Cranley


Hayward, Robert
Oppenheim, Phillip


Heathcoat-Amory, David
Paice, James


Heddle, John
Patnick, Irvine


Heseltine, Rt Hon Michael
Patten, Rt Hon Chris (Bath)


Hicks, Robert (Cornwall SE)
Pattie, Rt Hon Sir Geoffrey


Higgins, Rt Hon Terence L.
Pawsey, James


Hind, Kenneth
Peacock, Mrs Elizabeth


Hogg, Hon Douglas (Gr'th'm)
Porter, Barry (Wirral S)


Hordern, Sir Peter
Porter, David (Waveney)


Howarth, G. (Cannock &amp; B'wd)
Price, Sir David


Howe, Rt Hon Sir Geoffrey
Raffan, Keith


Hughes, Robert G. (Harrow W)
Raison, Rt Hon Timothy


Hunt, David (Wirral W)
Redwood, John


Hunt, Sir John (Ravensbourne)
Riddick, Graham






Ridley, Rt Hon Nicholas
Stewart, Allan (Eastwood)


Ridsdale, Sir Julian
Stewart, Andy (Sherwood)


Roberts, Wyn (Conwy)
Stokes, Sir John


Roe, Mrs Marion
Stradling Thomas, Sir John


Rossi, Sir Hugh
Sumberg, David


Rost, Peter
Summerson, Hugo


Rowe, Andrew
Taylor, Ian (Esher)


Ryder, Richard
Taylor, John M (Solihull)


Sackville, Hon Tom
Thompson, D. (Calder Valley)


Sainsbury, Hon Tim
Thorne, Neil


Sayeed, Jonathan
Townsend, Cyril D. (B'heath)


Scott, Rt Hon Nicholas
Trippier, David


Shaw, David (Dover)
Waddington, Rt Hon David


Shaw, Sir Giles (Pudsey)
Wakeham, Rt Hon John


Shephard, Mrs G. (Norfolk SW)
Walker, Bill (T'side North)


Shepherd, Colin (Hereford)
Waller, Gary


Skeet, Sir Trevor
Wardle, Charles (Bexhill)


Smith, Tim (Beaconsfield)
Wells, Bowen


Speller, Tony
Wheeler, John


Spicer, Sir Jim (Dorset W)
Widdecombe, Ann


Squire, Robin
Winterton, Mrs Ann


Stanbrook, Ivor
Winterton, Nicholas


Stanley, Rt Hon Sir John



Steen, Anthony
Tellers for the Noes:


Stern, Michael
Mr. Alan Howarth and


Stevens, Lewis
Mr. David Maclean.

Question accordingly negatived.

Clause 14

DISHONOURED CHEQUES

Amendment proposed: No. 57, in page 11, line 11, leave out 'comes into effect' and insert 'is passed'.—[Mr. Lilley.]

Dr. Marek: I simply say that the next time I shall have to be better at parliamentary draftsmanship.

Amendment agreed to.

Clause 16

TIME LIMITS FOR PROCEEDINGS

Amendment made: No. 56, in page 12, line 20, at end add—
'(2A) In section 28(5) of the Vehicles (Excise) Act 1971, for the words "section 147(1)" there shall be substituted the words "section 146A".'—[Mr. Lilley.]

Clause 21

FUEL AND POWER

Amendment proposed: No. 52, in page 13, line 39, leave out
'not intended for sale by the recipient'.— [Mr. Lilley.]

Madam Deputy Speaker (Miss Betty Boothroyd): With this it will be convenient to take Government amendments Nos. 53 to 55.

Dr. Marek: We should perhaps say a little about this amendment, because, again, some congratulations to the Government are in order. They have looked at the problems of the distribution of liquefied petroleum gas that we discussed in Committee and they have made certain changes, which I believe will be considered correct. Unfortunately, the hon. Member for Tatton (Mr. Hamilton) is not in the Chamber.

Mr. Neil Hamilton: I am.

Dr. Marek: I apologise, but I did not see the hon. Gentleman. I wonder whether he could tell us whether he feels that the changes are right. Will they mean that there will be much less administration for small holders and sellers of LPG?
Perhaps the Minister could elaborate a little on amendment No. 55, where it talks about quantities of fewer than 2 tonnes. Is that a realistic limit—too large or too small? I presume that the Government believe that it is about right.

Mr. Neil Hamilton: I know that Opposition Members often wish that I were not here, but I am sorry to disappoint the hon. Member for Wrexham (Dr. Marek) by being here now.
I thank my hon. Friends on the Front Bench for going so far to meet the concern that I expressed in Committee. I heartily endorse the Government's amendments. I hope, therefore, that the spirit of comradeship which has now broken out in the Labour party will spill over on to this side of the House, and that the hon. Gentleman will find it possible within his breast to compliment the Government, as I do.

Mr. James Wallace: The hon. Member for Tatton (Mr. Hamilton) has raised some of the issues that I wished to discuss. It appears that the Government have gone a considerable way to meeting a number of the points raised in Committee. However, I hope that the Minister will say a few words of explanation. Certainly he will recognise—as I have had correspondence with him on this point—that in my constituency a large number of people are dependent on cylinder gas. In particular, one of the community co-operatives on the small island of Papa Westray expressed its concern about the possible damage to business, the adverse effects on cash flow and the general administrative costs. It should be borne in mind that for the domestic consumer liquefied petrolum gas is VAT zero-rated, so there is no net gain to the Treasury when one considers input and output VAT. I would be interested to hear from the Minister whether he believes that the amendments will ease the burden that it is feared will fall on many small retailers, especially those in rural parts of the country.

Mr. Lilley: I am grateful to the hon. Member for Wrexham (Dr. Marek) for his tribute to the amendment. I pay tribute in turn to my hon. Friend the Member for Tatton (Mr. Hamilton) for raising the issue so forcefully in Committee and causing us to look again. That has resulted in the amendments, which I believe will meet the two principal objections. The first was that in various parts of the United Kingdom—Ulster, Scotland and especially the west country—a lot of liquefied petroleum gas is distributed by very small distributors in small quantities. Therefore, they are not registered for VAT and they might give up carrying out that useful service if faced with the requirement to register for VAT, even though that would enable them to claim back any VAT on the cylinders. I believe that we have got round that to the satisfaction of the industry by zero-rating consignments of 20 cylinders or fewer. I understand from my discussions with the Liquefied Petroleum Gas Industry Technical Association and others that that meets its concerns about those small distributors, and that it settles that problem.
Secondly, there was the question of whether the normal minimum requirement should be in terms of delivery size or tank capacity. Again, after discussions with the industry, I am persuaded that the tank capacity requirement, as a measure of what is a normal delivery to a final consumer, is appropriate. In response to the specific question from the hon. Member for Wrexham, I can tell him that the 2 tonnes mentioned in the amendment was decided after discussion with the industry and meets its requirement. I am glad that that has all-party support.

Amendment agreed to.

Amendments made: No. 53, in page 13, line 42, at end insert
and either the number of cylinders supplied is 20 or fewer or the gas is not intended for sale by the recipient;".
No. 54, in page 13, line 43, leave out
`not more than 2,500 litres of.
No. 55, in page 13, line 44, leave out
`where the gas is not contained in cylinders'
and insert
', otherwise than in cylinders, to a person at any premises at which he is not able to store more than two tonnes of such gas;'.—[Mr. Lilley.]

Clause 37

SCHEDULE E: ASSESSMENT ON RECEIPTS BASIS

Amendment proposed: No. 92, in page 25, line 23, at end insert—
`(2A) Where subsection (1) above applies in the case of emoluments received, or (as the case may be) received in the United Kingdom, after the death of the person who held the office or employment concerned, the charge shall be a charge on his executors or administrators; and accordingly income tax—

(a) shall be assessed and charged on the executors or administrators, and
(b) shall be a debt due from and payable out of the deceased's estate.'.—[Mr. Norman Lamont.]

Madam Deputy Speaker: With this it will be convenient to take Government amendments Nos. 93 and 94.

Mr. Nicholas Brown: As I understand it, the purpose of Government amendment No. 92 is to clarify what I believe the Committee already thought was the position—that clause 37 is intended to refer to a personal representative's earnings after the taxpayer has died, and that Government amendments Nos. 93 and 94 merely confirm the timing of the implementation of that section. If it does anything more than that, the Financial Secretary should tell us, but that is my understanding.

Sir William Clark: There is still some concern among employers as to the practical effects of the clause. Will my right hon. Friend confirm that consultation with employers will continue to ameliorate any difficulties caused by the new PAYE rules? If difficulties and practical problems are drawn to his attention, will he deal with them in such a way that no additional burden is placed on employers?

Mr. Norman Lamont: I give my hon. Friend the Member for Croydon, South (Sir W. Clark) that assurance. One or two potential problems have been revealed, but on the whole we have taken the view that the problems have been a little exaggerated. Obviously we are

open to consultation and we intend to consult. If it is necessary to make changes in the legislation next year to ameliorate matters we shall do that.
The amendment goes further than the hon. Member for Newcastle upon Tyne, East (Mr. Brown) said. It ensures that a charge to tax can be made on earnings received after a taxpayer's death and provides that the tax on such earnings shall be charged on the personal representatives and be a due debt from the estate. The amendment represents an addition, which makes a provision for after death, rather than being an amendment that drafts or clarifies.

Amendment agreed to.

Amendment made: No. 93, in page 27, line 19, at end insert—
'(3) This section shall not apply in the case of emoluments of an office or employment held by a person who died before 6th April 1989.'.—[Mr. Norman Lamont.]

Clause 38

SCHEDULE E: UNPAID EMOLUMENTS

Amendment made: No. 94, in page 27, line 36, at end insert—
'(3A) This section shall not apply to emoluments of an office or employment held by a person who died before 6th April 1989.'.—[Mr. Norman Lamont.]

Mr. Norman Lamont: I beg to move amendment No. 95, in page 28, line 14, at end insert—
'(8A) In the application of this section to emoluments of an office or employment under or with a person carrying on business as an authorised Lloyd's underwriting agent, the references in subsections (1)(d) and (5)(a) above to 6th April 1991 shall be construed as references to 6th April 1994.
(8B) Subsection (8A) above shall not apply unless the duties of the office or employment relate wholly or mainly to the underwriting agency business.
(8C) The reference in subsection (8A) above to an authorised Lloyd's underwriting agent is to a person permitted by the Council of Lloyd's to act as an underwriting agent at Lloyd's.'.

Madam Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 96 and 97.

Mr. Lamont: This amendment extends, in the case of employees and directors of Lloyd's underwriting agents, the time limit within which a claim for transitional relief must be made to prevent income earned before the introduction of the receipts basis being taxed twice—once when earned before 6 April 1989 and again when received after 5 April 1989. To take account of Lloyd's particular accounting arrangements, the time limit is extended by three years.
The amendment applies the transitional relief that applies to the introduction of the receipts basis to the special accounting requirements of Lloyd's. My hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot), who is no longer present, asked about Lloyd's in Committee. His concern is the subject of a later amendment. This one deals purely with the transitional relief.

Amendment agreed to.

Amendment made: No. 96, in page 28, line 14, at end insert—
'(8D) If in a particular case it appears to the Board reasonable to do so they may direct that subsections (1)(d) and (5)(a) above shall have effect in relation to that case as if for the references to 6th April 1991 or (as the case may be) 6th


April 1994 there were substituted references to such later date as they may specify in the direction.'.—[Mr. Norman Lamont.]

Clause 43

SCHEDULE D: COMPUTATION

Amendment made: No. 97, in page 30, line 28, at end insert—
'(5A) In the application of this section to the calculation of a person's profits or gains as an authorised Lloyd's underwriting agent—

(a) the references in subsections (1)(c), (3)(b), (4) and (5)(a) above to nine months shall be construed as references to three years and nine months, and
(b) the reference in subsection (5)(c) above to two years shall be construed as a reference to five years.

(5B) The reference in subsection (5A) above to an authorised Lloyd's underwriting agent is to a person permitted by the Council of Lloyd's to act as an underwriting agent at Lloyd's.—[Mr. Norman Lamont.]

Mr. Norman Lamont: I beg to move amendment No. 98, in page 30, line 28, at end insert—
'(5C) In a case where the period of account mentioned in subsection (1)(a) above begins before 6th April 1989 and ends before 6th April 1990, the references in subsections (1)(c), (3)(b), (4) and (5)(a) above to nine months shall be construed as references to eighteen months.'.

Madam Deputy Speaker: With this it will be convenient to take Government amendment No. 99.

Mr. Lamont: Clause 43 provides that in calculating an employer's profits for tax any remuneration still unpaid nine months after the end of the period of account in which it was earned and for which it was charged should be deducted not for that period but for the period in which it is eventually paid. Clause 44 applies similar provisions to investment and insurance companies. The purpose of the clauses is to ensure that there is not too long a gap between the time at which the employer gets tax relief for the payment of emoluments, and the time at which those emoluments are assessed to tax in the hands of the particular employee under the receipts basis. Without the provisions in the clauses an employer could get a deduction for remuneration which remained unpaid for a long time—perhaps indefinitely.
The new rules apply to calculations of profits for periods ending after 5 April 1989. Since publication of the Bill, representations have suggested that some companies may not be able to adjust their accounting arrangements immediately to determine and therefore pay remuneration within nine months of the end of an accounting period. My hon. Friend the Member for Croydon, South (Sir W. Clarke) may have been hinting at that. The consequence would be, in the short term, before people could adjust to the new regime, that companies would unexpectedly have to pay more tax because they would not get a deduction for unpaid remuneration, leading to cash flow problems in some cases. Where company accounts were more than 12 months in arrears, and were then brought up to date to satisfy the new rules, there would be a "bunching effect" on the payment of remuneration. That would result from more than one year's remuneration being paid in one tax year so that the company can comply with the nine-month time limit and get its deduction for the remuneration. In that situation some employees could find themselves paying tax at the higher rate where they would not otherwise have done so. To ease any transitional difficulties of this kind and to allow companies which need

to change their accounting arrangements a longer period to adjust to the new rules, the amendments provide that for a business's first period of account ending after 5 April 1989, the period during which remuneration must be paid if there is to be a deduction in that period of account is to be 18 months rather than nine months.
The amendment extends the period at the introduction of the new receipts basis to enable companies to get up speed in the preparation of their accounts.

Amendment agreed to.

Clause 44

INVESTMENT AND INSURANCE COMPANIES: COMPUTATION

Amendment made: No. 99, in page 31, line 38, at end insert—
'(5A) In a case where the accounting period mentioned in subsection (1)(a) above begins before 6th April 1989 and ends before 6th April 1990, the references in subsections (1)(c), (3)(b), (4) and (5)(a) above to nine months shall be construed as references to eighteen months.'.—[Mr. Norman Lamont.]

Clause 84

INTERPRETATION OF SECTIONS 85 TO 89 AND FURTHER PROVISIONS ABOUT INSURANCE COMPANIES

Amendments made: No. 77, in page 64, line 7, leave out from 'as' to 'nothing' and insert
'the provisions of that Schedule do not have effect in relation to sections 434 and 435 of the Taxes Act 1988'.
No. 78, in page 64, line 9, leave out from second 'the' to 'subsection' in line 10 and insert
'fraction of the profits referred to in subsection (6) of section 434 and'.—[Mr. Norman Lamont.]

Clause 86

SPREADING OF RELIEF FOR ACQUISITION EXPENSES

Amendment proposed: No. 100, in page 64, line 42, at end add
'other than commissions in respect of industrial life assurance business carried on by the company'.—[Mr. Norman Lamont.]

Madam Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 101, 102 and 103.

Dr. Marek: Congratulations to the Government are in order because they have taken heed of what was said in Committee and of the views expressed on both sides of the House. The Government are now willing to accept the commission expenses of certain life assurances. From reading the amendments I gather that the Government will go a little further and that existing commissions will be safeguarded. Is the insurance industry happy with that, as I suspect that it will mean some extra book-keeping? The amendments mean that people who entered into contracts before the Finance Bill will not have their contract commissions or expectations changed. I welcome that. There are several amendments in this group and I should be grateful if the Financial Secretary would say something about them.

Mr. Norman Lamont: The amendments make two relaxations in the rules which provide for life assurance


acquisition expenses to be spread for tax relief purposes over seven years. Both, as the hon. Member for Wrexham (Dr. Marek) said, relate to the treatment of commissions.
The first picks up a point made by the hon. Gentleman in Committee, which had also been put to us by the industry. The Bill provides that all commissions should be treated as acquisition expenses. That is right as a general rule, but the hon. Gentleman had a fair point when he suggested that it might bear somewhat hard on commissions paid to life assurance agents for the regular door-to-door collection of premium, which is a feature of industrial life assurance business. For that reason, we propose that commissions on that type of business should be taken out of the normal rule and treated as acquisition expenses only where they are incurred for the purpose of acquiring business rather than the commissions that are collected each year.
The Bill as it stands applies the spreading of relief to all commissions laid out after the end of this year, to whatever policy they relate. The industry has suggested that this would disrupt the expectations of offices and their existing policy holders because it would apply to future commissions paid in respect of policies already in force on Budget day. We see some force in this and propose that these commissions should not be subject to spreading, except when they relate to subsequent variations of pre-Budget policies.
7.30 pm
The hon. Member for Wrexham asked whether the insurance industry was happy with the amendments. I think that it will be content with the second purpose which I described. As to the first purpose—the treatment of the acquisition expenses of the industrial business—it is right and fair to say that it is satisfied with that. There might have been an argument about whether that treatment should have applied to other home service business, but there is a considerable problem of definition. It is my understanding—I hope that I am not misrepresenting the Association of British Insurers—that, in the end, it was content with that position.

Dr. Marek: I am grateful to the Financial Secretary for that explanation and I am glad that my understanding of the amendments is right. I am prepared to maintain my warm welcome for them.

Amendment agreed to.

Amendments made: No. 101, in page 65, line 6, at end add—
`(1A) The exclusion from paragraph (a) of subsection (1) above of commissions in respect of industrial life assurance busness shall not prevent such commissions constituting expenses of management for the purposes of paragraph (b) or paragraph (c) of that subsection.
(1B) Nothing in subsections (1) and (1A) above applies to commissions (however described) in respect of insurances made before 14th March 1989, but without prejudice to the application of those subsections to any commission attributable to a variation on or after that date in a policy issued in respect of an insurance made before that date; and, for this purpose, the exercise of any rights conferred by a policy shall be regarded as a variation of it.'.

No. 102, in line 8, after 'securing', insert
`on or after 14th March 1989'.
No. 103, in line 9, leave out 'already made' and insert
'issued in respect of an insurance already made (whether before, on or after that date)'.

Clause 171

ABATEMENT OF EXEMPTION WHERE CLAIM SETTLED OUT OF BENEFICIARY'S OWN RESOURCES

Amendment proposed: No. 72, in page 146, line 11, leave out 'one or more'.—[Mr. Norman Lamont.]

Dr. Marek: I do not want to delay the Report stage too much on this amendment. It appeared that it might have been a trivial amendment, but I am not sure. Will the Financial Secretary explain it?

Mr. Norman Lamont: It is an absolutely trivial amendment. It corrects a minor drafting defect in clause 171, which defines, in subsection 6, an exempt gift. Although the gift is singular, as presently drafted it is exempt by virtue of "any one or more" of the various inheritance tax exemptions. It can be exempt only under one of the exemption provisions, and the amendment reflects this.

Amendment agreed to.

Schedule 3

VALUE ADDED TAX: BUILDINGS AND LAND

Mr. Lilley: I beg to move amendment No. 5, in page 161, line 1 at end insert
`in either or both of the following ways, namely—
(a)'.

Madam Deputy Speaker: With this it will be convenient to take the following: Government amendment No. 6. Amendment No. 107, in line 3, insert—
`(4A) Zero-rating shall also apply for extensions and alterations to village halls and other facilities used similarly in providing social and recreational facilities for a local community.'.
Government amendments Nos. 37, 38 and 42.

Mr. Lilley: As you, Madam Deputy Speaker, will know, in implementing the European Court of Justice ruling, we have throughout sought to minimise the burden, especially on charities. Unfortunately, village halls represented a particular problem. In this context, I should declare a vested interest. I am the son of parents who throughout their lives have been concerned with the local village hall and it would be more than my life was worth if I had not sought every means to try to interpret the ruling in a way that was favourable to village halls.
However, after a considerable scrutiny of last year's court judgment, we reluctantly concluded that it was not permissible to retain zero rating for fuel, power and new construction for village halls and similar charitable community buildings, essentially because, although charitable, they appeared to be engaged in business as they were making supplies and hiring themselves out for a consideration.
A letter of 17 March from Madame Christiane Scrivener, the European Commissioner for tax matters, showed that the Commissioner might entertain a different interpretation of the judgment. I wrote to Madame Scrivener asking for clarification, and gave the Finance Bill Standing Committee an assurance that, if the Commission confirmed that it would not oppose the reinstatement of zero rating, the Government would bring forward any necessary amendments to the Finance Bill.
Madame Scrivener's reply suggested that, although continued zero-rating for supplies of fuel and power to


village halls was ruled out by the court, the Commission would not raise legal objections to retaining the zero rate for the construction of village halls. The amendment therefore seeks to reinstate for the construction of charitable community buildings the zero rate which was abolished on 1 April as a consequence of last year's court judgment.
The amendment is confined to buildings run by charities. It covers church halls, village halls and other community buildings providing similar social and recreational facilities for a local area. It also extends to buildings such as cricket pavilions and changing rooms, constructed for charitable playing fields and recreation ground associations.
The VAT construction clauses of the Finance Bill were brought into effect on 1 April under the Provisional Collection of Taxes Act 1968 and because it is not possible retrospectively to amend the PCTA resolution, the date for the statutory implementation of the relief is 1 August, after Royal Assent for the Bill can be expected to have been received. However, Customs and Excise will waive, extra-statutorily, any tax incurred between 1 April and 1 August on village halls or other buildings covered by the amendment.
I pay tribute to many Committee Members who pressed hard for us to look again and for the Commission to waive any objections which it might have to the continued zero rating of village halls. I do so not least to my hon. Friend the Member for Corby (Mr. Powell), who described what a tremendous effect it would have on his constituency where there are a great many village halls in operation or in the process of being built.

Dr. Marek: Congratulations are once again due to the Government, perhaps somewhat fortuitously. It appears that a letter from Madame Scrivener to a Member of the European Parliament was spotted, and it allowed the Economic Secretary to press home the point.
It was not just the Opposition who pressed the amendments in Committee, but Conservative Members and Liberal Members. I do not think a single hon. Member would have wished VAT to be imposed on village halls. It is extremely pleasant to see such an amendment on Report.
Can the Economic Secretary be more specific about the types of hall that will be exempt? He gave us some help and said that cricket pavilions would be exempt. Will sports halls be exempt? Those sports halls might be built partly by local authority funding, and the community might have a fund and ask for subscriptions to it. Some of these halls, especially if they are big enough to contain a basketball court, may be quite big and expensive. If a big hall did not fit under the heading of a village hall, I presume that it would not fall within the scope of the amendment. Where does the boundary fall? 1 have not seen the original letter from Madame Scrivener to the European Parliament Member, but I hope—providing the hall was for a community purpose, with sporting recreational or educational facilities—that we would try to make the definition of such a hall as wide as possible. However, that is perhaps a detail, and I am pleased that there was no opposition to this type of amendment. The Government have done well. I wish they could do as well in many other matters about which the Opposition seek to persuade them.

Mr. Beith: I welcome this improvement to the Bill and the extra-statutory concession which the Minister has just announced to make it clear that a period of liability will not arise between the original and the operative date.
As has been said, there was pressure from both sides of the Committee from the Minister to act, in particular that he should write to Madame Scrivener to explore what had been thought and said in the Commission. There is a difference between the approach of this country and most other European countries towards the provision of such facilities. In most other European countries about which I know something, it is general practice for local authorities to provide a large proportion of the community halls, village halls, sports halls and such facilities.
We have a unique and valuable system of voluntary provision of local community halls. It is perhaps at its strongest in the countryside in the form of village halls, but it is not unique to the countryside, because many neighbourhoods in town have a similar provision. It involves voluntary effort and fund raising of the most dedicated kind. Everyone agrees that it would be unreasonable to face that sector with a high tax bill.
That is one reason why I shall tempt the Government to go further, and why I argue that we would be well within the spirit of the concession that we have secured so far if we went further and got extensions of, and repairs to, village halls exempted from VAT and returned to zero rating. A large number of village halls were built a long time ago, so the problems they face are of renewal, repair and extension. Many were built at the end of the first world war as a local community's memorial to its war dead, and some were built at the end of the second world war. Sometimes, these buildings were put up using cheap construction methods because that was all that the community could afford. Many of them now need a great deal of improvement, and some need extension.
The Minister could usefully keep this matter under review and continue his fruitful correspondence with Madame Scrivener. I am sure that he is becoming familiar with her through the letters that they are exchanging. There is no doubt that the correspondence has helped to make it clear that the Commission, in seeking to take legal action, was not aiming its sights at village halls and local community facilities. Perhaps the Minister could go further and suggest a dinner in Brussels between him and the good lady, where, against a background of flowers and music, the matter could be discussed. Much more useful work could be done for the benefit of village halls.
I press on the Minister the value of amendment No. 107. I welcome the Government's inclusion of this provision and the way in which they have secured an understanding from the European Commission that, since what this country provides, through voluntary efforts, in village halls would not be subject to VAT anywhere else in the Community, because there it is mainly provided by local authorities, it is entirely reasonable that it should not be subject to VAT here.

Mr. William Powell: As my hon. Friend the Economic Secretary said, he was pressed on this point from both sides of the Committee, so when the hon. Members for Wrexham (Dr. Marek) and for Berwick-upon-Tweed (Mr. Beith) said that this was an all-party matter, they were correct. As the member of the Committee who initiated discussions on these matters all


those weeks ago, I was hardly aware what I was letting myself in for, because no issue has involved me in more correspondence than this one.

Sir William Clark: It serves you right.

Mr. Powell: As my hon. Friend says, I should keep out of these things, because I would have far less work to do.
What my hon. Friend the Economic Secretary announced last week in answer to a parliamentary question from me was confirmed in his remarks today, and it has been received with real enthusiasm in thousands of communities. It is no exaggeration to say that. This will undoubtedly be one of the most popular results of the Finance Bill.

Mr. Ian Taylor: The result will be received with more than great enthusiasm—it will be received with great relief. Many projects are under way and in planning stage and the burden of VAT if the extra-statutory concession had not been introduced would have been frightening for those who have to do the fund raising. We are grateful to my hon. Friend the Member for Corby (Mr. Powell).

Mr. Powell: I am grateful to my hon. Friend.
I never doubted the real determination of my hon. Friend the Economic Secretary to ensure that VAT should be zero-rated in the way in which we shall approve tonight. His determination to achieve that was quite obvious and I congratulate him on the tenacity that he has shown in this matter and on his determination to secure a result that has been so widely applauded.

Mr. Lilley: The hon. Member for Wrexham (Dr. Marek) asked me to clarify the definition further and asked in particular whether it would include sports halls. For those sports halls that are both charities and run for the benefit of the local community, the answer is yes, they will be included, as they come under the general heading of providing recreational facilities.
The hon. Member for Berwick-upon-Tweed (Mr. Beith) inadvertently gave the impression that I wrote to Madame Scrivener only when pressed to do so in Committee. In fact, I had already written and was awaiting a reply. He suggested that I should go further in my familiarity with the lady, but although I am grateful to her for her courtesy, co-operation and pragmatism, I do not think that I should follow all the innuendos that he conveyed.
7.45 pm
The hon. Member is correct to say that village halls are unique to this country, and that there is nothing similar on the continent. Both he and the House may think that it is odd, therefore, that how we tax them should be anything to do with the Community. I am happy that we have managed to achieve a possibly constitutionally bizarre result, whereby we have achieved a national solution rather than a uniform solution that fitted oddly to our unique national characteristics.
Amendment No. 107, tabled by the hon. Member for Berwick-upon-Tweed, would remove the charging of VAT on extensions. I am afraid that, under EC law, that is not possible. Under the sixth directive, to which we assented in 1977, we cannot reintroduce zero rating once it has been given up. We gave up zero rating in that respect in 1984.
I am grateful to my hon. Friend the Member for Corby (Mr. Powell) for his kind remarks and his welcome for these measures. I again pay tribute to him and to hon. Members on both sides of the Committee for the tenacity with which they pressed the case of village halls, a case which is dear to us all.

Amendment agreed to.

Amendment made, No. 6, in page 161, line 2 at end insert
';
(b) as a village hall or similarly in providing social or recreational facilities for a local community.'—[Mr. Lilley.]

Amendment proposed: No. 7, in page 161, line 39, leave out from beginning to end of line 42.—[Mr. Lilley.]

Madame Deputy Speaker: With this it will be convenient to take Government amendments Nos. 8, 33, 39, 49 and 50.

Dr. Marek: I think I understand these amendments, but it would be helpful if the Economic Secretary said something about them. I hope that he will explain the purpose of these amendments so as to confirm that our understanding of them is correct. What will be the effect of the amendments on the difference between beneficial owners and legal owners, and how will that be worked out in practice if the amendments are passed? I am not sure about that and any help would be welcome.

Mr. Lilley: This additional provision is made necessary by an aspect of English land law which does not sit very readily with a tax on supplies such as VAT. The difficulties arise because the interests in land and property can be split into two—the legal estate or interest, and the separate beneficial interest. I am happy to say that there are no such difficulties, I understand, in Scotland, which, in legal matters, so often gets it right. This split gives rise to the possibility of there being two different suppliers for the purposes of VAT every time a property is sold or let.
The problem is compounded by the fact that the owner of the legal estate—whose name appears on the conveyance as the vendor or lessor—is often merely a nominee while the beneficial owner is the person who really instigates the transactions and receives the payments. The practice of separation of the two interests is widespread and I am told that, even when the two interests could be merged into one so as to produce a single supplier for VAT purposes, this would be very onerous and have substantial financial implications for the companies involved.
Therefore, for practical purposes, we have decided to disregard the person in whose name the property is conveyed and to look to the person with the economic interest in the transaction—the beneficial owner. What we have done is to make him the person responsible for the VAT transaction. At the same time, we have made sure that he will also be the person entitled to the benefit of any input tax recovery if his supply of the building is a taxable supply.
This principle is not new to VAT. Since the introduction of the tax, there has been a special provision attached to the zero rating of sales and long lettings of buildings, so that a person constructing them could benefit from the zero rating and cover the tax on materials and services that he bought in, even though another legal person conveyed the property, provided that the benefit of the sale or long letting of the property passed to him. This


measure extends the same principle to the exemption and the taxing of property, either mandatorily or under the option to tax. It seeks to reduce uncertainty in the business community about who is making the supply and who can recover related input tax, and it therefore simplifies the VAT consequences of commercial property transactions.

Dr. Marek: The Economic Secretary appears to have a note in his hands. I do not know whether it is helpful. Has he received any representations from any part of the industry about the effect of the proposals? The amendments appear to be sensible, but having been tabled only two or three days before the debate, it is difficult to assess them and to ascertain whether there will be any consequences that we cannot readily foresee tonight. If the Economic Secretary says that he is not aware of any such consequences, I shall accept that. I do not intend to oppose the amendments.

Mr. Lilley: My discussions with the industry make me pretty confident that this clarification measure will be welcomed. It will deal with a problem that was not catered for in the original drafting. I am sure that it will be well received by the various groups to whom we have spoken, including industry groups and lawyers.

Amendment agreed to.

Amendment made: No. 8, in page 162, line 27, at end insert—
`(4A) Note (5) shall be omitted:—[Mr. Lilley.]
Amendment proposed: No. 9, in page 165, line 26, at end insert—
`(2) The Treasury may by order amend Schedule 6A to this Act.'—[Mr. Lilley.]

Madam Deputy Speaker: With this we shall discuss Government amendments Nos. 34, 36, 40 and 41.

Dr. Marek: I must take the Government to task. I understand that the amendments seek to give the Government power by order—admittedly by affirmative resolution—to change aspects of tax law and VAT legislation. If the Government were confident that they had their legislation right, these amendments would not have been tabled. If they had their legislation right, yet still needed to table amendments, I should not be speaking to them because they would probably have gone through on the nod. I suspect that the Government do not have their legislation right. I wonder whether there are sufficient numbers of civil servants in the Treasury dealing with the legislation to ensure that it is right.
The history of all the changes to VAT legislation makes a pretty story. In Committee the Government tabled a great many amendments on a Friday that we had to debate on the following Tuesday. Many hon. Members have to return to their constituencies on a Friday and so were not aware of the amendments. We therefore had to table starred amendments so that we could properly consider the Government's amendments. The Chairman, the hon. Member for Staffordshire, South (Mr. Cormack), was not pleased, yet it has happened again on Report. Amendments were tabled on Thursday, appeared on the Amendment Paper on Friday, and have to be debated today.
They are not the easiest of amendments to understand. I am prepared to bet that not many hon. Members, other than the Economic Secretary, can understand their detail. I suspect that the Government have tabled the amendments because, even now, they do not have their

legislation right. The Economic Secretary should come clean and admit that; after all, nobody is perfect. If he did so, it would be churlish of us to oppose the amendments.
The Government's practice on this occasion is certainly not a model for good legislation. The Opposition have learnt a lesson from this practice, and I hope that the Government also learn from it. It is an example of how not to conduct business. The Government should not table amendments at the last minute. If they intend to make complicated changes to next year's Finance Bill, they should table amendments at least a week in advance so that we have the opportunity to study them.

Sir William Clark: Hear, hear.

Dr. Marek: The hon. Gentleman and I do not often agree, but I am glad that we do so on this occasion. It is a sensible, non-party point. We need time to study the amendments and to consult outside bodies. If we are given only 48 hours' notice, it is impossible to do justice to the amendments—especially with a Finance Bill as long as this one. It has been impossible to do justice to all the Bill's provisions, although we did quite well in Committee in rather difficult circumstances. I hope that the Economic Secretary will tell us why he has tabled the amendments, although I suspect that I know the answer. If he confirms my suspicions, that will be the end of the matter and I will not oppose the amendments.

Mr. Lilley: The hon. Gentleman and other hon. Members who served on the Committee will recall that the original Bill contained provisions for amendment by order, by the negative procedure, if such an amendment was consequential to amendments made to the zero-rating and exemption schedules of the Value Added Tax Act 1983.
The new schedule 6A deals with some extremely complex and novel provisions—for example, the clawback provision contained in paragraph 1, the option for taxation in paragraphs 2 to 4, the self-supply charge on developers in paragraphs 5 to 7, and we have just dealt with a paragraph on legal and beneficial owners. The original proponents of VAT in this country extolled its virtues as a simple tax. That notion has long since been accepted as wishful thinking. Certainly VAT, as it applies to land and buildings and in the circumstances of this schedule, is extremely difficult.
It would be unrealistic to pretend that everything in schedule 6A will turn out to be perfect and incapable of improvement. We were forced by changes imposed upon us by the Commission to introduce new proposals at short notice. I decided, and I am glad that I did, initially, to introduce them in Committee, thereby giving hon. Members an opportunity to discuss them, and then to introduce further proposals, if necessary, on Report—which we have done, and in time for them to be discussed. It is possible that, in the light of experience, there will be gaps, and ambiguities and adjustments may be necessary. It would be wrong to wait for and then clog up the next Finance Bill with technical amendments.
I commend to the House this series of amendments, which gives the Treasury power to vary the schedule by order. That will usually be by affirmative resolution, other than where the amendment is merely consequential to an order providing relieving amendments to the zero-rating or exemption schedules, which requires only a negative resolution and was included in the original Bill. We are not


setting an undesirable precedent because already many things can be done by order, including changes in VAT rates and liability.
I hope that the House will accept my frank admission that we are not quite perfect, but we are getting there.

Amendment agreed to.

Amendment proposed: No. 10, in page 166, line 45, leave out 'sub-paragraph (2)' and insert
`sub-paragraphs (2) and (2A) and paragraph 3'.[Mr. Lilley.]

Madam Deputy Speaker: With this, it will be convenient to debate Government amendments Nos. 11 to 15.
Amendment No. 2, in page 168, leave out lines 4 to 7.
Government amendment No. 16.
Amendment No. 3, in page 168, line 8, after `irrevocable', insert
`except where a building is totally demolished or where a major reconstruction occurs on a listed building'.
Government amendments Nos. 17 to 20.

8 pm

Dr. Marek: This large group of amendments merits debate. The two Opposition amendments are not dissimilar to those debated in Committee, and attempt to cover a broad principle. I was not happy with the answers given in Committee as to why the Government inserted into the Bill the phraseology that they did.
Amendment No. 2 concerns buildings that are separated or joined. The Bill refers to buildings joined by covered walkways, and states that buildings, precincts and parades will be regarded as one building for taxation purposes. There is no justification for that view, other than that of simplicity. I hope that the Government will allow developers some leeway in deciding which buildings in parades and shopping centres can be separate and which cannot.
The problem can be overcome because it is not inconceivable that covered walkways could be covered one week and uncovered the next. Successful attempts could be made to present those as separate buildings for the purposes of the Bill. Also, a walkway that is currently uncovered might be covered later. It is in any event a somewhat artificial distinction, because covered walkways are needed in some parts of the country more than in others.
Government amendment No. 16 rectifies the position to a certain extent in respect of agricultural land. It states:
Where such an election is made in relation to agricultural land (including a building on agricultural land), it shall have effect in relation to any other agricultural land if that other land is not separated from it by—

(a) land which is not agricultural land; or
(b) agricultural land in separate ownership."

The Government presumably received representations from the farming industry and saw the sense of providing a different option for different parcels of land, but they have not gone far enough in applying the same philosophy to shopping centres and precincts.
I do not suggest that landowners or developers should be given the right to dictate to the Treasury which property should be deemed separate, but there must be a little flexibility. I do not believe for one moment that the drafting of the Opposition amendments will be accepted, because they would probably lead to undesirable deficiencies in other parts of the Bill. I am under no illusion

that the Economic Secretary will jump up and say, "I am persuaded by the hon. Gentleman's arguments and I accept his amendments." However, I wonder whether he agrees that there should be some flexibility in the interpretation of a single or multiple unit.
Amendment No. 3 would provide another option where a building is totally demolished, save for one facade—[Interruption.] Obviously the hon. Member for Croydon, South (Sir W. Clark) is not interested, but that aspect is of importance to people who are concerned about historical and listed buildings.
Value added tax leaflet 708/2/89 spells out on page 8 the position in respect of demolished buildings, albeit in a different context. It states that demolition is considered total even if there remains a single facade. It would be entirely reasonable to adopt the same definition for the purposes of the Bill. Suppose a staircase inside the building, as well as its facade, is listed. The developer could not then demolish that staircase, and the chances are that the site would not be developed. If the staircase is very fine but is not listed, the developer might say, "There is no question of my being able to exercise a new option unless I can demolish that staircase." That is the nub of the matter.
The danger is that architecture that should be preserved will not be protected unless the Government interpret VAT rules more flexibly. Although one appreciates that demolition must be more or less total, if a building has other features of architectural merit, demolition should still be regarded as total save for those features. That argument is not one that met with much sympathy from the Government in Committee, but I hope that Ministers have considered the arguments, and the slightly different amendments now before the House, and will be able to make an encouraging response.

Mr. Lilley: The group of seven Government amendments can all be described as drafting amendments because they do not represent any changes to our basic policy. The intention has always been that people should opt for buildings, including their sites and curtilage; for agricultural land, including agricultural buildings thereon; and for other land, including land containing civil engineering works. There is no great dissent over those categories.
However, the Law Society in particular was unhappy that the Bill contains ambiguities as to the word "land", which under the Interpretation Act includes buildings. Parliamentary counsel agreed that there was some substance to the Law Society's observation and redrafted to use the term "land" in the Interpretation Act sense, whereby there is no need to distinguish between land and buildings, and to reserve the use of the word "buildings" for cases where it is necessary to refer to buildings as such. The draftsman has therefore defined buildings for the purpose of the option by expressly including site and curtilage. I hope that there will be no difficulty in the House agreeing to the amendments.
As to amendment No. 2, if groups of individual units are in the same ownership and are managed as one coherent development, it seems reasonable that they should be regarded by the landlord as a whole for the purpose of the option. Where separate parts or units are in separate ownership, each legal person has his own option anyway. Similarly, if buildings are linked by a common covered walkway, it is likely to mean that there is some


community of purpose in their use and, if they are in the same ownership, it seems reasonable that they should be subject to a single option. Buildings linked by a covered walkway in separate legal ownership would not be covered by a single option anyway.
The hon. Member for Wrexham (Dr Marek) suggested that in some parts of the country covered walkways may not be necessary. If he will tell me what parts of the country they are, I shall spend my holidays there.
We try to maintain unitary operation of the option where there are a number of facilities within a common development because allocation of input tax on common facilities to different shops in a shopping development is difficult.
If all the shops are owned by a single owner who also owns the common facilities, it will be much better for him to make a single option and then to be able to reclaim the VAT on all inputs relating to common facilities as well as to the individual shops. If there is deviation from that principle, more complexity will be introduced, along with a greater opportunity for avoidance and even fraud, and I do not think that Opposition Members would wish to encourage that.
As far as we can see, there is no real problem except in relation to exempt tenants—building societies and banks, for example. An owner might wish to make a different option in respect of premises occupied by building societies and banks from that in respect of shops. Again, I am rather surprised that the Opposition should wish to facilitate tax avoidance by means of those parts of the exempt sector, thus giving rise to the complexities that I have mentioned.
The hon. Member for Wrexham saw a contrast with agricultural land; I find a parallel. I do not know what would happen if two separate estates were joined by covered walkways—as far as I know there is no example of that in the countryside—but where pieces of land are contiguous they are treated as a single unit. Where two estates are clearly separate, they are treated as separate units. That strikes me as similar to the principle that we are using for shopping centres.

Dr. Marek: If a shopping precinct included a right of way—down the middle, let us say—that was dedicated to the local authority and thus not in the ownership, beneficial or otherwise, of the developer, would the precinct be treated as two precincts?

Mr. Lilley: I fear not. As I recall, our definition of agricultural land does not define a farm divided by a road as two separate farms, and it would be equally perverse to apply such a definition to a shopping centre. Although at first sight there may appear to be a problem that the amendment would resolve, I think that on closer inspection it may prove to be a non-problem, which therefore requires no solution.
The hon. Gentleman, along with others, raised the points contained in amendment No. 3 in Committee. Concern was expressed about the conditions of the option to tax commercial and industrial buildings: hon. Members wished to know whether it provided an incentive for total demolition, as opposed to the retention of a feature of architectural merit such as a facade.
If a building is listed or is in a conservation area, planning constraints are likely to prevent such action. It is right that planning constraints rather than a tweaking of

the tax laws should constitute the primary way for us to make planning decisions. Even if no such constraints existed, however, I do not believe that the incentive suggested by the hon. Gentleman and the amendment would exist. A considerable amount of tax will be at stake in a redevelopment, whether or not there is total demolition. The presumption, therefore, must be that the redeveloper will want to continue to opt tax in the majority of cases.
In addition, the special charge on developers will, if anything, encourage the retention and refurbishment of existing buildings, because the special self-supply charge—assuming that Government amendment No. 32 is accepted—will not apply to reconstructions, enlargements or extensions of, or the addition of annexes to, existing buildings. Customs and Excise will in any case continue its current practice of regarding a building as new and thus subject to a fresh option, although part of a previous building—such as a single facade—is retained and incorporated within it. Developers, of course, may not always be eager for a building to be regarded as new if as a result the self-supply charge on developers takes effect, or the sale of the building becomes compulsorily taxable. The case for amendment is therefore not compelling.
The hon. Gentleman asked specifically whether, if a staircase or similar internal feature were retained, it could be compatible with demolition. I am reliably informed that it would not be accepted that the building had been demolished if a staircase were retained. Obviously, the best way in which to ensure that staircases of great value are not destroyed is generally to protect them through the planning rules rather than the tax system.

Dr. Marek: I am not sure that we have progressed any further as a result of the Economic Secretary's reply. Let me deal with his points one by one, although I do not expect him to reply again.
It is doubtful whether Government amendment No. 16 provides a concession; exempt concerns unable to reclaim their input tax may not regard such action as tax avoidance. The amendment provides that
land shall be taken not to be separated from other land if it is separated from it only by a road, railway, river or something similar".
What if a shopping centre includes a public green, perhaps with a fountain? That hardly constitutes a road, railway or river; a road is, in a sense, one-dimensional, while a green could be described as two-dimensional. The Economic Secretary mentioned farms divided by roads, which he said would be deemed as single units, but what if one part is a mile or two away from the other?
The Minister says that there will be no problems, because land that is separated will be clearly delineated, and no arguments will arise with Customs and Excise. I accept that, although I am still a little worried about the possible problems with shopping centres and arcades. I am prepared to take the hon. Gentleman's word for it if he says that there will be no problems.
I have mixed views on what the Minister said about facades and staircases. At one stage he said that Customs and Excise was prepared to regard a building as being demolished if a facade, for instance, was retained. That led me to believe that the same could apply to two facades, or


to a facade and a staircase. A minute later, however, the hon. Gentleman said that staircases would not be included.
I am apprehensive. I hope that Customs and Excise will read the report of our debate, and will treat any applications with the utmost flexibility. It is all very well to say that we should use the planning laws to safeguard staircases and facades. I should be the first to agree if the planning laws had teeth, were obeyed and were not overturned on appeal by Conservative Secretaries of State, but unfortunately that is not the case. I am not saying that the planning procedures do not work well, but they do not work well enough.
Having said that, I hope that the Economic Secretary's reply will be read by interested parties in the United Kingdom, and that Customs and Excise, having also read it, will treat any further negotiations with some flexibility.

Amendment agreed to.

Amendments made: No. 11, in page 166, line 45, leave out
'has been made under this paragraph in relation to any building or'
and insert
`under this paragraph has effect in relation to any'.
No. 12, in page 167, line 7, at end insert—
'(2A) Sub-paragraph (1) above shall not apply in relation to a grant if—

(a) the grant is made to a registered housing association and the association has given to the grantor a certificate stating that the land is to be used (after any necessary demolition work) for the construction of a building or buildings intended for use as a dwelling or number of dwellings or solely for a relevant residential purpose; or
(b) the grant is made to an individual and the land is to be used for the construction, otherwise than in the course or furtherance of a business carried on by him, of a building intended for use by him as a dwelling.'.

No. 13, in page 167, line 16, leave out
'or building to which the election relates'
and insert
'in relation to which the election has effect'.
No 14, in page 167, line 18, leave out 'or building'.
No. 15, in page 167, line 44, leave out from 'above' to second 'of in page 168, line 4 and insert
'shall have effect in relation to any land specified, or of a description specified, in the election.
(2A) Where such an election is made in relation to, or to part of, a building (or planned building), it shall have effect in relation to the whole of the building and all the land within its curtilage; and for the purposes.'.

No. 16, in page 168, line 7, at end insert—
'(2B) —Where such an election is made in relation to agricultural land (including a building on agricultural land), it shall have effect in relation to any other agricultural land if that other land is not separated from it by—

(a) land which is not agricultural land; or
(b) agricultural land in separate ownership.

(2C) For the purposes of sub-paragraph (2B) above—

(a) land shall be taken not to be separated from other land if it is separated from it only by a road, railway, river or something similar; and
(b) land is in separate ownership from land in relation to which an election is made if the person by whom the election is made has no interest in, right over or licence to occupy it and, where that person is a body corporate, no relevant associate has any such interest, right or licence.'.

No. 17, in page 168, line 10, leave out
`notification of the election shall be'

and insert
`shall not have effect unless written notification of it is'.
No. 18, in page 168, line 17, after 'above', insert 'and this paragraph'.
No. 19, in page 168, line 18, leave out 'that paragraph' and insert 'paragraph 2 above'.
No. 20, in page 168, line 30, at end insert—
'(6) In paragraph 2 above "registered housing association" means a registered housing association within the meaning of the Housing Association Act 1985 or Part VII of the Housing (Northern Ireland) Order 1981.'.—[Mr. Lilley.]
Amendment proposed: No. 21, in page 169, line 33, leave out from 'period' to 'on' in line 34 and insert
'beginning with the day when the construction of a building or work within sub-paragraph (2) below is first planned and ending ten years after the completion of the building or work'. —[Mr. Norman Lamont.]

Mr. Deputy Speaker (Sir Paul Dean): With this, it will be convenient to consider amendment No. 4, in page 169, line 37, after `supply;', insert
'except where he intends to make a taxable supply under 5(3)(b) below;'.
Government amendments Nos. 22 to 32 and 43 to 48.

Mr. Anthony Coombs: Having struggled with the concept of a one-dimensional river, and given the byzantine complexity of many of the clauses, it is appropiate to congratulate the Government on devising a narrow and fairly safe path for most self-developers whose sole lets are to exempt tenants. We are between the devil of the European Commission and its interpretation of article 27 of the 16th directive and the deep blue sea of the need to minimise the effects of VAT on non-domestic construction, in particular the imposition of VAT on building land associated with it.
In retrospect, I am glad that the Commission had reservations about the first scheme that was put before the Committee. It would have required declarations from owners when they were beginning their development as to whether they intended to sell the buildings or tax rents to exempt users. It would have constrained their commercial judgment. It would have meant that they had to fund VAT on land during construction. That is not the case now.
The second scheme, to impose VAT at valuation on land and buildings self-supplied within 10 years of construction, would have hit a number of institutions-in particular, educational institutions that are not exempt from VAT via their charitable status because they take fees. They would have been hit very hard-in particular, the universities that bought land many years ago, possibly many centuries ago, or that were given land or bought it cheaply. VAT would have been charged on the present-day valuation, which would have led to a significant increase in project costs.
The Committee of Vice-Chancellors and Principals tells me that the graduate business school at Strathclyde would have faced increased costs amounting to £150,000, which would have led to it not being viable, and that costs on a sports pavilion would have increased by £105,000. The university of Cardiff was concerned that costs of existing capital programmes would increase by £660,000. What is possibly even more important, London university said that the future development on land that was released by the merger of King's college, Chelsea college and Queen Elizabeth college would have been put at risk. That would have been detrimental to the restructuring and to the


greater efficiency and responsiveness of the university sector, which is part of the Government's higher education strategy.
The new historic cost basis valuation will help, and ought to be warmly welcomed. Nevertheless, the new regulations are not a bed of roses, particularly in the education sector. That is why I tabled an amendment that provided for the specific zero rating of education buildings. However, I am told that, under the VAT directive, that is not possible.
The maintained sector of education, which I believe includes city technology colleges and grant-maintained schools, will be zero-rated or will be reimbursed for the VAT that is paid on buildings under clause 20. However, when independent schools undertake projects of more than £100,000, they will pay VAT on construction for the first time. If they buy land for construction, they will pay VAT on that, too. VAT will also be payable on land that universities have recently acquired for restructuring purposes. It will be payable at market cost.
I hope that the Universities Funding Council will distinguish between the different kinds of restructuring to which I have referred and that it will be funded appropriately by the Government. I hope that the Government will continue to press the European Commission on the question of independent schools so as to ensure that non-profit-making independent schools with charitable status are allowed VAT relief on capital building, since that relief is now available to the public sector of education.

Mr. Curry: I congratulate the Government on having teased out a solution with the Commission on yet another issue. The European Court ruling is subject to various interpretations, so it is very difficult to obtain absolutely precise guidance on it. I am pleased that the Government were willing to enter into negotiations. The Commission's willingness to respond pragmatically has also been helpful and perhaps could be described as the acceptable face of Brussels bureaucracy.
I am also pleased that the Government have been willing to err on the side of adventure regarding village halls and the question that is being debated now. They have decided to take a chance, knowing that they are faced with a Commissioner who is likely to adopt a sensible approach.
I have two questions to put to the Minister on Government amendment No. 31. The first relates to a building contract that has been entered into before 21 June 1988, before the date of the court ruling and before the statement was made in the House. Secondly, if the owner of a building has paid the contractor for work, what will happen if he is paid before 1 April but the work does not start until after 1 August? I should be grateful if those two points could be clarified.

Mr. Beith: The hon. Member for Wyre Forest (Mr. Coombs) has obviously studied this matter carefully and knows a great deal about it, but we are still receiving representations from the Committee of Vice-Chancellors and Principals and others expressing considerable anxiety about the matter, despite the Government's efforts to find a fresh solution. I hope that the Minister will clarify the law concerning future gifts and acquisition of land. Would it be, rather like the National Trust, that universities

would have to ask for a dowry before they accepted land because of the valuation that would be placed on ii if they developed the land?
The universities are being asked to engage in their own fund raising and to finance their own development as much as possible from non-Government sources. Therefore, they are understandably anxious about aspects of the tax regime which may make that more difficult, even after the changes.

Sir William Clark: On Government amendment No. 31, will the Minister confirm that the word "value" means cost price and not market value? Furthermore, where grants are mentioned, does that mean the immediate grant by means of which an interest in the land is acquired and not any previous grants? In other words, will he confirm that the various costs of acquisition will not be added together?

Mr. John Heddle: I have to declare an interest as the consultant partner in a firm of surveyors that may have clients, institutional or otherwise, who may be affected directly or indirectly by the amendments. I am pleased that the amendments have been tabled after the tabling of new clauses that caused some concern to the financial sector when the Bill was considered in Committee. I am also pleased that about 20 minutes or so ago we were told that further amendments may be made by means of order, in the light of experience.
In that context, I wish to raise a technical but very important matter. I accept, as do my hon. Friends the Members for Wyre Forest (Mr. Coombs) and for Skipton and Ripon (Mr. Curry), that it is right and proper that VAT should be levied on the historic cost and construction cost of land rather than on the valuation—the residual value of the ultimate development. That is fine in regard to a freehold property, but the position of a leasehold interest is not at all clear. Although the grant of a lease is a supply, a further supply is treated as taking place each time rent is due or paid. As the rent is further consideration for the grant, the fiction appears to be that a grant is made with each rent payment. That appears to be the meaning behind the drafting. Otherwise, the final words referring to consideration in the form of rent would be meaningless.
8.30 pm
If a developer-contractor has a long leasehold interest on a site, its value would include not only the purchase price or the premium paid to acquire it, but the rent payable in the past or in future, apparently without any discount for time. If that is correct, the value of the developer-contractor's interest may equal or even exceed that of the freehold—for example, if he holds a lease at a full rent.
I do not believe that my hon. Friend the Economic Secretary intended that when he he said that the self-supply would be based on the land cost. I ask him to consider that it is perhaps reminiscent of development land tax, where the value of a leasehold included the value of the right to receive the rent, although it was only the present-day value. Presumably, in future any developer-contractor who wishes to minimise the impact of the self-supply charge will make sure that he leases the site at a rent which is unascertainable at the time of the self-supply charge.
In practice, the provision may catch only existing land interests and the unwary. I ask my hon. Friend to consider


that, arguably, the provision is not in accordance with the directive, which requires supplies of building land to be taxable, but leasing and lettings to be exempt. By taxing the rents, the measure appears to go beyond the spirit and the letter of the directive. I ask my hon. Friend to consider this and to consult officials in Customs and Excise to find out whether that was the intention of the amendments; if not, perhaps he will be prepared to come back at a later stage with an amendment by order.

Mr. Christopher Hawkins: I ask my hon. Friend the Economic Secretary to clarify a couple of points, as I was not on the Committee. Am I right in thinking that the main effect of amendment No. 31 will be that land already owned by universities or other institutions will have VAT levied on the historic cost and not on the market value when it is developed? If so, the provisions will be greatly welcomed by universities.
I add to the projects mentioned by my hon. Friend the Member for Wyre Forest (Mr. Coombs) another which would have been in jeopardy as a result of the original proposals. At St. Bartholomew's hospital medical college, a new building is now at the planning stage. It will house a new institute of preventive medicine and has been funded entirely by the private sector. That project would have had to be aborted if there were to be an unanticipated VAT bill, which would have totalled £1·5 million, on the self-supply of land. These concessions are greatly welcome and are extremely important, if I have understood them correctly.
Today I talked to the Committee of Vice-Chancellors and Principals; it still has one concern, which I hope my hon. Friend will clarify. We understand the position of land already owned by universities, but how will gifts of land be treated for tax purposes? It would be a great shame if universities had to refuse gifts simply because they could not afford to pay tax on them.

Dr. Marek: We now come to what could be termed the Barclays bank clauses, which will no doubt save Barclays bank about £40 million. I do not say that in any spirit of envy. If the changes were not made, there would have been a general unfairness in other matters. The Government have gone some way towards getting rid of that unfairness, not least of which involves the problem which has beset the Committee of Vice-Chancellors and Principals, the problem referred to by the hon. Members for Wyre Forest (Mr. Coombs), for High Peak (Mr. Hawkins) and for Berwick-upon-Tweed (Mr. Beith). I too have received a sheet of paper from the Committee of Vice-Chancellors and Principals, and I hope that the Economic Secretary will address that problem. It has been almost completely alleviated, but there are still concerns about future gifts and acquisitions. I am sure that the Committee of Vice-Chancellors and Principals will read very carefully what the Economic Secretary says, and any reassurance that he can provide will be very welcome.
For the record, I refer to the debate in Standing Committee, when I asked:
Will a developer who has developed and intends to sell within three years as a new building, but meanwhile leases, perhaps to exempt tenants, still be unable to recover his inputs, although he will be required to standard rate the building when he sells it?"—[Official Report, Standing Committee G; 18 May 1989, c. 139.]

The Economic Secretary said that he would write to me, and he did, saying:
On the question of self-supplies of new commercial buildings by developers you asked about the position of input tax recovery by developers who intended to sell within three years—a standard-rated supply—but meanwhile let on an exempt rental. In the straightforward case, the letting on an exempt rental would trigger the self-supply charge. All input tax attributable to the self-supply, eg on construction costs and professional fees, would be recoverable as it was incurred during the course of the development. When the standard-rated sale of the building took place at a later stage a proportion of the tax on the self-supply itself would be recoverable—under the proposed capital goods provisions which apply to buildings costing over £250,000 and which are due to come into force from next April. For example, if the building had been let at an exempt rent for two years since it was built and then sold, in principle eight-tenths of the VAT on the self-supply would be recoverable.
I hope that this is clear and has set your mind at rest on these two points.
It has certainly helped a great deal, as there is nothing in the Bill about the possibility of recovering input tax.
Amendment No. 4 was tabled to cover that point. I shall not press it, but for the purposes of the debate is it fair for a building to be let on an exempt rent for a couple of years, with only 80 per cent. of the input recoverable? If the rental was for only a short time—perhaps not two years but only six months or a year before the building was sold—should that short period be completely exempt from the provisions set out in the Economic Secretary's letter to me? I ask the Economic Secretary for a little more elucidation.
Does the Economic Secretary accept the point we made about input supplies if a new building has to be constructed if a fire completely burns it down and a new building has to be constructed and tax would be payable on the building and the land? Although the building had burnt down, the land would still be there. We felt that it was unfair for tax to be paid on the construction and the land; perhaps it would have been fairer if tax had to be paid only on the building. Does Government amendment No. 32 do anything about that? Some helpful explanatory remarks by the Economic Secretary would be greatly appreciated.
Are the amendments in conformity with the sixth VAT directive? Can the Economic Secretary assure the House that they will not result in further infraction proceedings in the European Court? I should have thought that some element of inflation would have to be added to the historic costs, and then the self-supply would be charged on the historic costs plus a little more. There is a danger that the Commission may say that this is not good enough, and other countries may start proceedings. I do not know—[Interruption.] I will not tempt them. Time is getting on. I should like the assurance of the Economic Secretary that my fears have no foundation. [Interruption.] The hon. Gentleman thinks that that is not a problem. In that case, perhaps I should not say more. If he does not spend too much time on my last point, I hope that he will give us an explanation of the others.

Mr. Lilley: We are considering a number of amendments and perhaps it would be helpful if I dealt first with amendment No. 4, to which the hon. Member for Wrexham (Dr. Marek) has referred. The present scheme encourages developers building for letting to opt to tax rents from the beginning of the letting. If they do not, they must account for tax—on the value of the land and construction services—straightaway. The amendment


would bring back the requirement for certificates of intent, which were a feature of the building land scheme originally in the Bill. Although a necessary feature of that scheme, it made for added complexity, and its absence is a welcome simplification to the Bill.
If the developer did not carry out his declared intention of making the taxable sale, he would simply have to account for tax at the end of the three-year period, and then only on the historic value of the land and construction services. There would be no penalty for spurious declaration. Effectively, the developer could delay accounting for tax on the building even though he had no real intention of making a taxable supply of it. It cannot be right to encourage spurious declarations in that way. I hope that the Opposition, having seen that that is probably the unintended consequence of amendment No. 4, will find it unnecessary and unattractive.
Any developer who has to pay the special self-supply charge will be able to recover his inputs on the development—the VAT that he incurs on construction services and materials and any VAT that he may have been charged, under the option, when he acquires the land. There would be complexities over input tax recovery attributable to up to three years of exempt letting before taxable sale of the building. It would be wrong to allow input tax recovery on the construction services and on the purchase of the land if that purchase were taxed under the option when there were, initially at least, to be exempt lettings of the building. As the Bill now stands, there are no such complexities.
The proper mechanism for dealing with the change from exempt lettings to taxable sale lies in the proposed capital goods scheme, which is due to come into force from next April. Draft regulations for this have been published. This scheme will enable a developer who initially pays the special charge to recover a proportion of it if, as a fact, he makes a taxable sale of it, or opts to tax the letting of it, within 10 years.
I must admit that Government amendment No. 23, to delete reconstructions and enlargements of existing buildings from the scope of the self-supply charge, owes more to expediency than to conviction. The Government's decision to alter the basis of the self-supply from open market value to cost, although a useful simplification for most new buildings, introduces complexities in determining the appropriate cost basis for reconstructions and enlargements in respect of the land element of the cost. There are many different circumstances in which works of this type are affected, and it is not clear what is the most appropriate and equitable cost basis.
Certainly, a self-supply charge will be necessary to prevent easy avoidance by leaving minimal elements of an existing building and calling the subsequent development a reconstruction or by abutting a new structure on to an existing one with unnecessary internal access between them, so that it can be claimed that the new structure is an enlargement of the existing one. I have therefore authorised Customs to consult interested bodies to see whether it is possible to establish a consensus on the type of reconstructions or enlargements which should be liable to the self-supply charge and the most equitable basis for assessing the cost. We shall obviously come back to the House when those discussions are complete.
8.45 pm
The central amendments in the group are Government amendments 29 and 31, on which most hon. Members who have spoken have concentrated. I gave the Standing Committee a lengthy explanation of how and why the need for the self-supply charge arose, and I will not weary the House by repeating what I have said. Broadly speaking, the self-supply charge is needed because sales of finished buildings bear tax on their sale value, which obviously includes the value of the land. Building land itself is not taxed. Exempt businesses could therefore avoid VAT on land by developing untaxed land themselves rather than buying completed buildings which bear tax on the selling price, including the inherent land value. All new buildings going into consumption should be taxed; otherwise, there will be avoidance and distortion.
The Commission refused to endorse our original solution to the problem by taxing the self-supply of building land as such. Taxing the self-supply of the finished building was, from our point of view, the second best solution, but it was the only one acceptable to the Commission. I thought it right to introduce amended proposals, compatible with the Commission's objections, as soon as possible in Committee to ensure full discussion and to leave scope for further revision on Report. I regret, as I said at the time, that that gave the Opposition a minimal chance to prepare before the debate in Committee, but I think that they recognise that it has been useful to air the subject before reaching this stage of the Bill.
The amended provisions would have put everyone acquiring new buildings on the same footing, whether they bought the buildings, leased them or built them on their own land. However, the only way to do this was to tax the open market value of the self-supplied buildings. I have received representations that that would place an unreasonable tax burden on institutions which may have to redevelop land they have held for generations or land they may be given at some time in the future. This was not the Government's intention. In addition, the burden of taxation would inevitably depend on somewhat subjective valuations.
We have therefore devised a solution intended to meet the concerns of the institutions affected, including universities, colleges, schools and charities as well as banks and other members of the exempt financial sector. While meeting the Commission's objections to our original proposals on building land, the buildings concerned will now be valued at the historic cost of the land involved, plus the cost of construction.
A number of hon. Members have raised specific points, to which I shall endeavour to respond. My hon. Friend the Member for Croydon, South (Sir W. Clark) has apologised to me because he had to leave the Chamber at 8.45 pm. To respond to his point, I should say that "grant" means latest grant of freehold, not the cumulative total as he feared.
The hon. Member for Berwick-upon-Tweed (Mr. Beith) referred to future gifts. Gifts should be valued at historic cost. Therefore, there should be no need for tax arising on the full value of the land that is subsequently built upon. If someone takes the trouble to sell something to another person for a very small sum, that will be the cost basis for VAT purposes, if that person then builds something for self-supply upon it. Let us suppose that a


generous benefactor gives a university a piece of land for £1. The university would be liable to VAT of 15p on that £1, which would not be crippling.
My hon. Friend the Member for Skipton and Ripon (Mr. Curry) asked about the wording of sub-paragraph (2)(b) in Government amendment No. 31, and in particular the reference to
other than any that are zero-rated".
The objective here is to exclude from the tax base for the self-supply charge any services on which the developer has been charged no tax, either because he pre-paid his contractor before 1 April 1989 for services to be rendered after that date, or because he has been entitled to receive zero-rated services from his contractor if supplied before 21 June 1993 under relief for legally binding obligations. The developer who himself makes a zero-rated supply of his interest in the building because he is entitled to the transitional relief under paragraphs 12(1) or 12(2) of schedule 3 is not in any event caught by the self-supply charge by reason of paragraph 12(6). All supplies which are or have been properly zero-rated are excluded from the cost of construction for the purpose of the self-supply charge. My hon. Friend's concerns are fully met in that respect.
I have already effectively dealt with the issue raised by my hon. Friend the Member for High Peak (Mr. Hawkins). My hon. Friend the Member for Mid-Staffordshire (Mr. Heddle), who, in the course of consultations last summer and autumn, made some helpful and thoughtful contributions which were of great benefit to us in framing the legislation, also raised some other points today. We are not compulsorily taxing rent. The self-supply charge is on the finished building, but we are valuing the self supply at land cost plus construction costs. That is the basic framework and we have abandoned the proposal based on the open market value of finished buildings.
The point about future rents payable by leasehold developers is significant. There would be a particular problem where the developer has acquired a leasehold interest in the site for his new building, but on terms that he will pay the freeholder a percentage of the rent that the developer actually receives over the period of the lease. That obligation to pay the freeholder is a cost to the developer, albeit an unquantifiable cost.
Our amendment includes proposals to exclude from the tax value of the self-supply charge rents that cannot be ascertained at the time of the self-supply. However, to leave the tax value on that basis permanently would simply invite developers to undertake all their developments for exempt or partly exempt tenants on a leasehold basis with cost expressed largely or wholly in terms of a percentage of future rents received. I have instructed Customs and Excise, therefore, to consult interested bodies to devise an appropriate solution to this problem. Subject to that qualification, I recommend the amendment to the House.

Amendment agreed to.

Amendments made: No. 22, in page 170, line 8, leave out from beginning to end of line 11 and insert—
`(b) the building or work is not used by him at any time during the period in, or in connection with, making any exempt supplies of goods or services.'.

No. 23, in page 170, line 13, leave out 'paragraphs 6 and 7' and insert 'paragraph 6'.

No. 24, in page 170, line 15, leave out 'constructed' and insert 'constructs'.

No. 25, in page 170, line 16, leave out 'ordered' and insert 'orders'.

No. 26, in page 170, line 17, leave out 'financed' and insert 'finances'.

No. 27, in page 170, line 27, leave out 'paragraphs 6 and 7' and insert 'paragraph 6'.

No. 28, in page 170, line 37, leave out 'land' and insert `work'.

No. 29, in page 170, line 42, leave out from 'applies' to `shall' in line 43 and insert
`the interest in, right over or licence to occupy the building or work (or any part of it) held by the developer'.
No. 30, in page 170, line 47, at end insert
`or, if later, of the prescribed accounting period during which the building or work becomes substantially ready for occupation or use.'
No. 31, in page 170, line 48, leave out from beginning to end of page 171, line 5 and insert—
'(2) The supply treated as made by sub-paragraph (1) above shall be taken to be a taxable supply and the value of the supply shall be the aggregate of—

(a) the value of grants relating to the land on which the building or work is constructed made or to be made to the developer, other than any grants to be made for consideration in the form of rent the value of which cannot be ascertained by the developer when the supply is treated as made; and
(b) the value of all the taxable supplies of goods and services, other than any that are zero-rated, made or to be made for or in connection with the construction of the building or work.

(3) Where the value of a supply which, apart from this sub-paragraph, would be treated as made by sub-paragraph (1) above would be less than £100,000, no supply shall be treated as made by that sub-paragraph.'.

No. 32, in page 171, line 6, leave out from beginning to end of line 33.

No. 33, in page 171, line 34, at end insert—
'7A. Where the benefit of the consideration for the grant of an interest in, right over or licence to occupy land accrues to a person but that person is not the person making the grant—

(a) the person to whom the benefit accrues shall for the purposes of this Act be treated as the person making the grant; and
(b) to the extent that any input tax of the person actually making the grant is attributable to the grant it shall be treated as input tax of the person to whom the benefit accrues.'.

No. 34, in page 171, line 39, leave out from beginning to end of line 41.

No. 35, in page 171, line 46, after 'contract', insert
`except that a term of a tenancy or lease shall not be taken to provide that the rule contained in that subsection is not to apply in the case of the tenancy or lease if the term does not refer specifically to value added tax or this section.'.

No. 36, in page 171, line 49, at end insert—
'7A. In section 45(4) (orders etc.) of the Value Added Tax 1983, there shall be added after paragraph (c)—
(d) an order under section 35A above, except one making only such amendments as are necessary or expedient in consequence of provisions of an order under this Act which—

(i)vary Schedule 5 or Schedule 6 to this Act; but
(ii) are not within paragraph (c) above.".'.

No. 37, in page 172, line 41, after 'to', insert
`sub-paragraphs (1A) and (1B) and'.

No. 38, in page 172, line 43, at end insert—
'(1A) Note 4(b) to Group 8 of Schedule 5 to the Value Added Tax Act 1983 shall have effect in relation to grants, assignments and other supplies made on or after 1st August 1989.'.

No. 39, in page 172, line 43, at end insert—


`(1B) In relation to grants and assignments made on or after 1st April 1989 but before 1st August 1989—

(a) that Group shall have effect as if the Notes to it included a Note in the same terms as Note (1) to that Group as it had effect before the substitution made by paragraph I above; and
(b) Group 8A of that Schedule shall have effect as if the Notes to it included a Note in the same terms as Note (5) to that Group as it had effect before the amendments made by paragraph 2 above.'

No. 40, in page 172, line 44, leave out 'and 10' and insert
'7A, 10 and 12(6) and (7)'.
No. 41, in page 172, line 45, leave out
`paragraphs 2 to 7 and 9'
and insert
`section 35A(2) of, and paragraphs 2 to 7A'.
No. 42, in page 172, line 47, leave out
`sub-paragraphs (1) and (2) above'
and insert
'the preceding provisions of this paragraph'.
No. 43, in page 174, line 1, leave out `to 7' and insert
`and 6'.
No. 44, in page 174, line 2, leave out
`(or substantially reconstructed a protected building)'.

No. 45, in page 174, line 9, leave out 'or 8A'.

No. 46, in page 174, line 11, leave out
'(or substantially reconstructed a protected building)'.

No. 47, in page 174, line 14, leave out
'(or reconstruct) the building or to construct'

and insert 'the building or'.

No. 48, in page 174, line 16, leave out '(or reconstruction)'—[Mr. Lilly.]

Mr. Heddle: I beg to move amendment No. 105, in page 174, leave out lines 21 to 23 and insert—
'(7) The supplies made pursuant to sub-paragraph (I) above shall be taken to be zero rated supplies for the purpose of sub-paragraph 2(b) above if:

(a) the building was constructed (or reconstructed) pursuant to a legally binding obligation incurred before 21st June 1988; or
(b) the grant referred to in paragraph 5(1)(a) of Schedule 6A is made pursuant to a legally binding obligation incurred before 21st June 1988; or
(c) input tax thereon is attributable to zero-rated supplies.

(8) For the purposes of sub-paragraph (7) above—

(a) a grant shall be treated as made in pursuance of a legally binding obligation incurred before 21 June 1988 if sub-paragraph (c) below applies.
(b) a person shall be treated as having been under a legally binding obligation incurred before 21st June 1988 to construct (or reconstruct) a building or any development of which it forms part if sub-paragraph (c) below applies.
(c) this sub-paragraph applies if—

(i) the person making the grant or assignment or constructing (or reconstructing) the building or any development of which it forms part had before that date arranged (without being legally bound) to make such grant or other supply or carry out such construction or reconstructions; and
(ii) the arrangement was made in writing, or were evidenced by a note or memorandum thereof made in writing before that date; and
(iii) a legally binding obligation to make the grant or other supply or to construct the building (or reconstruct) is on or after 21st June 1988 but before 21st December 1989 entered into by that person.

and any such obligation shall be treated as having been made on the date when the arrangement first came into existence.

(9) If the Commissioners so require, proof of any of the matters specified in subparagraphs (6)(a), (b), (c)(i) or 8(c)(ii) above shall be given to their satisfaction by the production of documents before 21st June 1988.'.
My hon. Friend the Member for Corby (Mr. Powell) paid tribute to my hon. Friend the Economic Secretary for the way in which he wanted to ensure the minimum impact in practical terms at all times. I associate myself with those remarks and thank my hon. Friend the Economic Secretary for his kind remarks a moment ago. It is a pleasure to be able to endeavour to make some practical contribution to legislation before that legislation is cast into stone. In that spirit, I ask my hon. Friend to consider the amendment and to see whether he can find some way to meet the practical concerns of many contractor-developers, who will be hit by the transitional arrangement if the time limit is not extended.
The amendment's purpose is to extend the proposed VAT transitional relief to the position where, before I April 1989, a person has constructed a building, or paid for a new building, and so VAT on the construction costs is recoverable or to the position where, before 21 June last year—the date of the judgment—a person constructing a building or granting or assigning the relevant interest in land had entered into arrangements for carrying out the construction, or for granting or assigning the interest, and where those arrangements subsequently mature into legally binding contracts before 21 December next. The amendment is designed to ensure that the benefit of zero-rating for grants or major interests in new buildings is not clawed back by the self-supply charge and to deal with circumstances that commonly arise.
It is common practice in the development and construction industry that a development project will commence on the basis of letters of intent, heads of agreement or other similar arrangements which, while falling short of creating legally binding obligations, nevertheless form the basis of agreement between the parties which is eventually embodied into formal legal documentation. The amendment adopts a principle and a format used in previous Finance Acts to extend transitional relief on the introduction of tax changes to the situation where the parties are essentially committed to a course of action which, at a later stage, becomes legally binding and legally documented. The amendment in no way alters any previous form, but takes account of the practical effect of agreements entered into in principle which ultimately become enshrined legally, in this case before 21 December next.
The transitional reliefs recognise that where a person had become legally committed to carrying out building work or to constructing a building before the judgment of the European Court on 21 June last, he should not be prejudiced by the changes to VAT on non-domestic construction. Many developer-contractors will rightly take advantage of the transitional reliefs. However, many projects are of such size and complexity that a developer who was, before 21 June last, committed to carrying out a project may not have the benefit of the transitional reliefs. That is because—especially in the case of large-scale developments—formal contract documents are often entered into after a considerable time. The preparation and planning stages may take months—or even years in the case of, for example, the Liverpool Street station complex. Construction frequently commences before legal documentation is finalised. The parties are prepared to


proceed on the basis of detailed heads of agreement because of the delays caused by the complexity of the legal documentation, which deals with many matters that are not relevant to the principle—the construction of the building—such as subsequent letting and so on.
9 pm
As a result, a number of contractor-developers who became committed to projects before 21 June last and who have incurred substantial expenditure on the projects will not have entered into formal construction contracts by that date or into a legally binding obligation to construct the building. Much of the work will be carried out before the grant of the final detailed planning consent under which the building is constructed. Such contractor-developers will not be able to take advantage of the transitional reliefs enshrined in the Bill. They will have made an appraisal of the viability of their projects on the basis of existing VAT rules and will have entered into commitments on that basis, but will now have to bear an unforeseen additional cost if they are to complete the project. I hope that my hon. Friend the Economic Secretary will have some sympathy with my view that that unforeseen additional burden may call into question the economic viability of projects committed before the date of the judgment.
Although the introduction of the option to tax will, in many cases, enable the developer to recover the VAT, many major inner-city regeneration schemes will be affected. That is why I feel so strongly about the matter. The Government are wholly commited to the regeneration of our inner cities and it would be a shame if they could not find a way to grant additional transitional relief to ensure that the projects can go ahead, in accordance with our manifesto commitment.
Many of the projects depend for their viability on occupation, at least in part by tenants in the financial or insurance sectors. It is tenants in those sectors who are most likely to acquire space in the larger city developments— precisely the type of developments to which developers who are unable to take advantage of the proposed transitional relief may have become committed before 21 June last.
I realise that, in the longer term, developers who undertake developments aimed at the financial sector will have to face this question, which arises as an inevitable consequence of the European Court's decision. But any developer-contractor who becomes committed to such a development after 21 June will do so having had the opportunity to take the new VAT regime into account. It is only developers who were already committed to a project before 21 June last who will be unfairly prejudiced and to whom I believe additional transitional relief up to 21 December next should be made available.
I accept that the Government must comply with their obligations under Community law. The question whether fresh infraction proceedings would be brought in respect of additional transitional provision is both practical and political. However, assuming that existing transitional provisions are not unacceptable to Mrs. Scrivener and the Commission, it is unlikely that a loosening of the term "legal obligation" without substantially extending the scope of the transitional relief in time or nature would necessarily prove unacceptable.
My hon. Friend the Economic Secretary has heard the broad thrust of my argument before. I hope that, in this context, as a contribution to inner-city regeneration and because so many schemes are entered into under heads of agreement before the confirmaton of legally binding documentation my hon. Friend will find it in his heart to extend the period of transitional relief.

Dr. Marek: I listened with interest to the argument of the hon. Member for Mid-Staffordshire (Mr. Heddle). There can be no doubt that there has been some rough justice for some companies which had decided on projects that were absolutely certain to go ahead, but for which contracts had not yet been signed by 21 June. The hon. Member for Mid-Staffordshire said that the Economic Secretary had heard his arguments before. If the Economic Secretary had heard his arguments before and done nothing about them, they must have fallen on stony ground. In my view, it would not be in the interests of good government to listen to them at this stage and amend the Bill accordingly. I suspect that many developers have now realised that the arrangements were not perfect. But the Bill has had its Second Reading and its Committee stage and we are now on Report, quite late in the parliamentary year. I cannot recommend that the Economic Secretary accept the amendment. However, I recommend that the hon. Member for Mid-Staffordshire put his name down to join the Standing Committee and consider the Finance Bill next year. We would be very pleased to see him. He could advance his arguments in Committee and we could talk about them.
However, the Committee's wish prevailed and many hon. Members regretted that a perfect solution could not be found. The Opposition would support the Economic Secretary if he refused to listen to the arguments put forward by the hon. Member for Mid-Staffordshire.

Mr. Beith: To proffer support for the official Opposition will immediately flash a red light to the Treasury Bench, and the Government will realise that this must be an important point. I must not criticise the hon. Member for Wrexham (Dr. Marek), for he did me a favour. The Minister will recall that, in Committee, I tabled an amendment on this subject, but, because of the death of a close relative that day, I was unable to be present when the Committee reached it. The hon. Member for Wrexham was kind enough to move the amendment for me. Any lack of conviction on his part was not to his discredit, because he was performing a kind service. I hoped that the act of moving the amendment might persuade him of the merits of the argument, but it obviously has not yet done that.
One of the reasons I wanted the amendment to be accepted and not be withdrawn in Committee and moved for the first time on Report was that I wished Ministers to consider the matter in sufficient time to bring changes on Report. I am disappointed that they have not seen fit to do so. It is not a matter that we can leave aside until next year. It affects decisions that have already been taken and projects that are already in hand. It has about it a rather worrying retrospective character, not because of the Government's original intention but simply because the drafting was not sufficiently wide.
The hon. Member for Mid-Staffordshire set out some of the problems that arise. I will not go over the ground that he carefully covered, but there are other problems. A


case in Newcastle was brought to my notice. A developer had made his original commitments with the city council, but, because of the changed policy on how things are to be handled on Tyneside, the responsible body became the development corporation. The legally binding contract was subsequently made with the development corporation, which apparently wanted an unencumbered company to make the commitment, and therefore a new company was created by the same people to carry out the same projects. The effect was that the legally binding commitment was too late to benefit from the transitional relief, even though all the other circumstances suggested that the transitional relief was intended for precisely such a case.
The object must surely be not to impose on people tax burdens that they would not have had to accept if they had been aware of what was coming, and, in particular, not to do so in a way that might threaten the viability of a project.
As the hon. Member for Mid-Staffordshire pointed out, we are dealing with inner-city schemes on which the Government have set considerable importance in their policy for the regeneration of inner cities and, in some cases, schemes which, by their very nature, have a narrow margin of viability. Therefore, it does not make much sense for a substantial tax burden suddenly to be added when a project is well advanced. The principle is clearly recognised by the Government in the presence of transitional relief provisions, but those provisions do not extend to the reality of commitments actually made by developers to local authorities and development corporations for aspects of the work or phases of the scheme that may have already begun.
I am disappointed that Ministers have not followed precedents in statute for commitments other than legally binding commitments. They should have done something about the weakness in provisions that are well intentioned but would have been very much better if they had been drafted to include the sort of cases that the hon. Member for Mid-Staffordshire and I have tried to bring to their notice.

Mr. Lilley: My hon. Friend the Member for Mid-Staffordshire (Mr. Heddle) has moved a complex amendment. Not surprisingly, there are technical difficulties which mean that I cannot accept it. I will not pursue that point, because there are more substantial reasons why I cannot recommend that hon. Members accept amendments along those lines even if we could overcome the technical problems, and likewise the proposal by the hon. Member for Berwick-upon-Tweed (Mr. Beith).
In providing transitional relief, our primary concern was to deal with the problem of construction companies with a legal commitment to build a building, which they had entered into before the court ruling, at a price based on the contract being zero-rated, and which would subsequently find that contract bearing 15 per cent. VAT. Such companies would be legally required to go ahead and complete the building and might be faced with potential bankruptcy. We had to bring in transitional arrangements to deal with that position.
Partly as a result of the persuasive representations of my hon. Friend the Member for Mid-Staffordshire, we went further and extended our provisions more widely than had been proposed originally. I hope that we thereby met most of the legal obligations that people had entered into ahead of the court judgment.
However, we did not think it right to provide a relief where no legal obligation had been entered into, but simply an arrangement that might subsequently mature into a legal obligation. Although some such agreements may be precise, others may be vague and it would be difficult to extend the transitional relief without such arrangements becoming open-ended. Indeed, that would be all the more difficult to justify since from mid-December 1988 onwards—once the Advocate General's opinion had been published—developers who had been properly advised were pretty aware that zero-rating was likely to be declared unlawful under the sixth directive. Indeed, over the preceding three years many people had acted on the presumption that that would be the outcome of the case. Therefore, that change was not as difficult to foresee as some tax changes.
There is no precedent in VAT provisions for the sort of proposal that my hon. Friend the Member for Mid-Staffordshire has suggested. Although the development land tax has some similarities with the transitional relief once granted, DLT and VAT are different animals. Development land tax operated at rates of up to 80 per cent. which naturally affected the transitional relief appropriate in those circumstances.
The main relief that we have built into the operation of this tax is the option to tax. That means that any fully taxable tenant will be able to pass on—or rather, reclaim—any VAT that is imposed on his rents, so that it will not stick on him. In turn, the landlord will be able to reclaim the VAT on construction if he opts to tax his rents. The whole thing washes out of the system. It sticks only in the case of exempt and partially exempt tenants, of which there are about 45,000 out of a total of 1·6 million firms registered for VAT. We should not exaggerate the extent to which they dominate new developments and can render them profitable or unprofitable. We have no evidence of any schemes being aborted as a result of any lack of transitional relief in this respect.

Dr. Marek: It would be useful if the Minister could state how much money would be forgone by the Treasury if the amendment were accepted.

Mr. Lilley: Unfortunately, the cost is unquantifiable, but substantial. Because the amount is vague, the arrangement will inevitably be open-ended. There is no evidence that any harm is being done by the absence of such relief, given the extensive reliefs that we already have.
Therefore, although I understand the spirit in which the amendment has been moved by my hon. Friend the Member for Mid-Staffordshire and supported by the hon. Member for Berwick-upon-Tweed, I must recommend the House to reject the amendment.

Mr. Heddle: It may be news to you, Mr. Deputy Speaker, that I failed to satisfy the examiners in the general certificate of education at O-level on four successive occasions. Similarly, I have failed to satisfy the Chairman of the Committee of Selection and to be selected to serve on a Finance Bill Standing Committee on no less than nine successive occasions. Therefore, I suspect that I shall have to disappoint the lion. Member for Wrexham (Dr. Marek) in his kind invitation to join him in smoke-filled rooms in another part of this Palace next year.
I am well aware of the case in Newcastle to which the hon. Member for Berwick-upon-Tweed (Mr. Beith) referred. He illustrated very graphically the reason why, in


equity and in practical terms, I would have wished my hon. Friend to accept the amendment. Such is my respect for my hon. Friend the Economic Secretary to the Treasury and such is my respect for the fact that he has taken on board a number of proposals that I have made to him informally in the past, so that when he says at that Dispatch Box that he is unable to accept the amendment, even if it were technically correct, I know that his word is as good as his bond. Therefore, with great reluctance, I have no alternative but to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 6

RETIREMENT BENEFITS SCHEMES

Amendments made: No. 73, in page 194, line 18, leave out '(5) above' and insert '(7) below'.

No. 74, in page 194, line 45, leave out
'prescribed by the Treasury under section 160(5)'
and insert
`applicable for the purposes of section 160'.—[Mr. Norman Lamont.]

Schedule 9

LIFE POLICIES ETC. HELD BY COMPANIES

Amendment made: No. 51, in page 210, line 27, at end insert—
'3A.—(1) Section 541 shall be amended as follows.
(2) After subsection (4) there shall be inserted—
(4A) Where, immediately before the happening of the chargeable event, the rights conferred by a qualifying endowment policy are held as security for a debt owed by a company, then, if—

(a) the conditions in subsection (4B) below are satisfied,
(b) the amount of the debt exceeds the total amount previously paid under the policy by way of premiums, and
(c) the company makes a claim for the purpose within two years after the end of the accounting period in which the chargeable event happens,

this section shall have effect as if the references in subsection (1)(a) and (b) to that total amount were references to the amount of the debt.

(4B) The conditions referred to in subsection (4A) above are—

(a) that, throughout the period beginning with the making of the insurance and ending immediately before the happening of the chargeable event, the rights conferred by the policy have been held as security for a debt owed by the company;
(b) that the capital sum payable under the policy in the event of death during the term of the policy is not less than the amount of the debt when the insurance was made;
(c) that any sum payable under the policy by reason of the chargeable event is applied in repayment of the debt (except to the extent that its amount exceeds the amount of the debt);
(d) that the debt was incurred to defray money applied—

(i) in purchasing an estate or interest in land to be occupied by the company for the purposes of a trade carried on by it, or
(ii) for the purpose of the construction, extension or improvement (but not the repair or maintenance) of buildings which are or are to be so occupied.

(4C) If the amount of the debt is higher immediately before the happening of the chargeable event than it was at

some earlier time during the period mentioned in subsection (4B)(a) above, the amount to be taken into account for the purposes of subsection (1) above shall be the lowest amount at which it stood during that period.
(4D) If during the period mentioned in subsection (4B)(a) above the company incurs a debt by borrowing in order to repay another debt, subsections (4B) and (4C) above shall have effect as if, where appropriate, references to either debt included references to the other.

(3) In subsection (5), after paragraph (b) there shall be inserted "and
(c) "qualifying endowment policy" means a policy which is a qualifying policy by virtue of paragraph 2 of Schedule 15;".'.[Mr. Norman Lamont.]

Schedule 11

DEEP GAIN SECURITIES

Mr. Lilley: I beg to move amendment No. 79, in page 215, line 44, at end insert—
'(2A) For the purposes of sub-paragraph (2) above "redemption" does not include any redemption which may be made before maturity only at the option of the person who issued the security (and no other person).'

Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 83 and 84.

Mr. Lilley: The amendment arises from a commitment made by the Government in Committee to ensure that a security is not treated for tax purposes as a deep gain security simply because its terms of issue give the issuer the option to redeem it before its stated maturity.
Such options for the issuer to redeem the bond early—or call options, as they are often known—will usually involve the payment of either a fixed premium or an amount linked to the market value of some other comparable security. The idea is to compensate the lender for the dislocation of his investment and to allow him to invest in an instrument with a yield at least as attractive as the one which is being redeemed early. However, where this premium is great enough to constitute a deep gain—or is not known for certain but could be great enough—the security is classified as a deep gain security. It is then taxed according to the provisions of schedule 11, as currently drafted.
Issuer options of this kind are features of a wide range of bonds, some of which are in other respects deep gain securities but many of which are not, including some convertibles and some straight bonds issued at par or a shallow discount. Such options are outside the control of the investor.
Following the publication of the Finance Bill, we received a number of representations about the nature of such bonds. We came to the conclusion that in this respect the provisions of schedule 11 had been cast too wide and that it would not be right for a bond to be taxed as a deep gain security solely because of its issuer options.
The amendment ensures that options for the issuer to redeem a bond before its stated maturity are disregarded in determining whether it is a deep gain security. This means that a bond will not be a deep gain security for tax purposes if it has no other feature which would make it one. If, on the other hand, it is a deep gain security for some reason other than its issuer options—for example, it is issued at a deep discount and has a variable coupon—it will fall squarely within schedule 11. I hope that that is clear to the House.

Amendment agreed to.

Amendments made: No. 80, in page 215, line 49, leave out 'and' and insert—
'(cc) is not a convertible security, and'.

No. 81, in page 216, line 37, leave out 'or'.

No. 82, in page 216, line 42, at end insert
'or
(c) the security was issued before 9th June 1989 and was quoted in the official list of a recognised stock exchange on 8th June 1989, and under the terms of issue the amount payable on redemption is determined by reference to the movement of a published index of prices of shares quoted in the official list of a recognised stock exchange.'.

No. 83, in page 217, line 12, leave out from 'applied' to 'it' in line 13 and insert
'to determine the amount payable on redemption or to determine interest'.

No. 84, in page 217, line 40, at end insert—
'(8A) For the purposes of sub-paragraph (5) above "redemption" does not include any redemption which may be made before maturity only at the option of the person who issued the security (and no other person).'.

No. 85, in page 217, line 50, at end insert—
'(9A) In a case where the terms of issue contain provision for the amount payable on redemption to be not less than an amount stated in the terms, the provision shall not prevent the fourth condition being fulfilled if—

(a) the security was issued before 9th June 1989, and
(b) the amount stated does not constitute a deep gain (within the meaning given by paragraph 1(8) above).

(9B) In a case where—

(a) the terms of issue contain provision for the amount payable on redemption in any of the qualifying circumstances (set out in sub-paragraph (10) below) to be not less than an amount stated in the terms, and
(b) the security was issued before 9th June 1989,

the provision shall not prevent the fourth condition being fulfilled.'.

No. 86, in page 218, line 1, leave out 'sub-paragraph (7)' and insert
`sub-paragraphs (7) and (9B)'.

No. 87, in page 218, line 9, at end insert—
'(d) the security was issued by a company before 9th June 1989 and a person gains control of the company in pursuance of the acceptance of an offer made by that person to acquire shares in the company.'.

No. 88, in page 218, line 15, at end insert—
`(13) For the purposes of this paragraph "control" (in relation to a company) shall be construed in accordance with section 840 of the Taxes Act 1988.'

No. 89, in page 218, line 15, at end insert—

'Convertible securities

2A.—(1) For the purposes of paragraph 1 above a security is a convertible security if—

(a) it was issued by a company before 9th June 1989,
(b) under the terms of issue it can be converted into or exchanged for share capital in a company (whether or not the company is the one which issued the security), and
(c) the condition set out in sub-paragraph (2) below is fulfilled.

(2) The condition is that—

(a) at some time in the qualifying period the security was quoted in the official list of a recognised stock exchange,
(b) at some time in that period relevant share capital was so quoted, or
(c) each of paragraphs (a) and (b) above is satisfied (though not necessarily as regards the same time).

(3) For the purposes of sub-paragraph (2) above the qualifying period is the period of one month beginning with the day on which the security was issued;
(4) For the purposes of sub-paragraph (2) above relevant share capital is share capital in the company into whose share capital the security can be converted or for whose share

capital the security can be exchanged; and relevant share capital need not be share capital into or for which the security can be converted or exchanged.
(5) References in this paragraph to share capital are to share capital by whatever name called.'.—[Mr. Norman Lamont.]

Schedule 14

CAPITAL GAINS TAX: GIFTS ETC.

Mr. Allan Stewart: I beg to move amendment No. 106, in page 237, line 5, at end insert—
`(c) For the purposes of this section, use and occupation of any property by a Scottish partnership shall, notwithstanding section 4(2) of the Partnership Act 1890, be treated as use and occupation of it by partners'.
The amendment has been proposed by the Institute of Chartered Accountants of Scotland to which I am an adviser. It is a technical amendment and its purpose will be fairly evident to my hon. Friends.
In the Finance Bill as it stands the holdover relief, which is intended to be availabe to individuals and trustees on the gift of business assets, will be denied to members of Scottish partnerships. In law, under the Partnership Act 1890, the Scottish partnership, unlike an English partnership, is a separate legal person. The amendment will, therefore, ensure that members of a Scottish partnership receive identical treatment to other partners and that the transfer of business property of a partnership by way of gift can benefit from the capital gain being deferred. It does not change the purpose of schedule 14. The problem arises from the 1890 Act. I hope that my amendment will receive a sympathetic response from my right hon. Friend.

Mr. Norman Lamont: The amendment seeks to preserve capital gains tax gifts relief for business assets used in Scottish partnerships. I am advised that I am able to reassure my hon. Friend that his amendment is unnecessary. Although in partnership law a Scottish partnership is treated as an independent entity, for capital gains tax purposes it is transparent. That follows from specific provisions in section 60 of the Capital Gains Tax Act 1979.
Accordingly, gifts relief, like retirement relief, will be available to partners on gifts of business assets used in a Scottish partnership in exactly the same way as for partners in an English partnership.
I shall, of course, study what my hon. Friend has said. If anything causes me to re-examine the advice given to me I shall do so. I am, however, advised as I have told my hon. Friend.

Mr. Stewart: I am extremely grateful to my right hon. Friend for that reassurance. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Mr. Michael Colvin: I beg to move amendment No. 104, in page 237, leave out lines 14 to 18.
The amendment effectively removes the definition of a holding company, a trading company and a trading group. My purpose is to offer the House the opportunity to


debate the implications of the Chancellor's proposals in the Bill on capital gains tax holdover relief. At this late hour I doubt that that invitation will receive many takers.
Holdover relief means the postponement of capital gains tax until such time as assets are sold. It was rightly introduced by the Government to avoid double capital taxation through capital transfer tax and capital gains tax and to encourage the creation of wealth. It has worked extremely well.
In 1986, however, the Chancellor abolished capital transfer tax on lifetime gifts and introduced inheritance tax instead to encourage lifetime giving or the passing of one's assets to the next generation. That was a welcome move.
Now the Government seem to be reimposing a tax on lifetime giving as clause 124 repeals the general holdover relief for gifts or disposals made after 14 March 1989, although it retains it for gifts of business, farm and heritage assets; and, of course, gifts between husband and wife will continue to be exempt. The issue was given an airing in Standing Committee and is recorded in column 456 of the Official Report. The Government have now brought forward their amendment to allow capital gains tax gifts roll-over relief to be retained for agricultural landlords qualifying for agricultural property relief at 30 per cent. Therefore, my right hon. Friend the Chancellor has demonstrated his willingness to consider specific categories of investor. I believe that 51 per cent. family-owned trading companies also join the list of exemptions.
I argue that the Chancellor's list of exemptions is too narrow, but, more important, the arbitrary nature of the holdover reliefs that are left in place is contrary to the declared strategy of our party on taxation. I note that Butterworth's Handbook says:
The restriction of hold-over relief will have a profound effect on estate planning, for it will mean gifts of assets with substantial accrued gains are unattractive. Unless the gift is one of those limited categories where hold-over relief is still available, it will carry the risk that both CGT and IHT will he payable.
I do not know how much revenue the Budget proposal on this issue is likely to raise. I believe that £40 million was mentioned, but perhaps my right hon. Friend the Financial Secretary will enlighten us when he replies.
With the leave of the House, it is my intention to withdraw my amendment if I can prise out of my right hon. Friend an undertaking to receive representations from individuals and companies, particularly close companies on which the proposal is harsh, and to monitor most closely the effect of his measures so that in next year's Budget the list of exemptions can be widened so as not to deter the creation and retention of wealth.
In essence, the Finance Bill restores the position on capital taxes relief on transfers which existed in the last year of the last Labour Government. A Conservative Finance Act should move away from Socialist measures, not return to them.

Dr. Marek: If the Act restores the position which existed in 1979, the Opposition would say that it was probably a far fairer and more sensible measure. However, we do not want to argue at this stage. Will the Financial Secretary give an estimate of the cost to the Treasury that would be incurred if the amendment was accepted?

Mr. Norman Lamont: I cannot give an estimate of the cost because I am not precisely clear what the amendment is meant to do. It does not have the effect that my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) described.
We have abolished holdover relief because there is no longer a danger of the double charge. As my hon. Friend said, some types of assets still receive holdover relief. I think that he was arguing that that category should be widened. I am prepared, without commitment, to listen to any representations made on that subject.

Mr. Colvin: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 58, in page 239, line 31, after 'sub-paragraph (2),' insert
`the words "at the rate of 50 per cent." shall be omitted, and'.
No. 59, in page 240, line 24, after 'sub-paragraph (2),' insert
`the words "at the rate of 50 per cent." shall be omitted, and'.
No. 60, in page 241, line 2, leave out
`at the rate of 50 per cent.'.

No. 61, in page 241, line 13, leave out `(a)'.

No. 62, in page 241, line 17, leave out '(b)' and insert
`either—
(a)'.

No. 63, in page 241, line 18, leave out '5' and insert '25'.

No. 64, in page 241, line 20, at end insert
'or
(b) the transferor is an individual and, at any time within that period, the company is his family company.'.

No. 65, in page 241, line 36, leave out
'a chargeable gain would accrue'
and insert a 'gain accruing'.

No. 66, in page 241, line 38, at end add
`would be a chargeable gain'.

No. 67, in page 242, line 38, at end insert—
'(cc) by virtue of subsection (4) of section 71 of that Act (accumulation and maintenance trusts) does not constitute an occasion on which inheritance tax is chargeable under that section,'.

No. 68, in page 245, line 15, leave out from beginning to end of line 20.—[Mr. Lilley.]

Schedule 17

REPEALS

Amendments made: No. 49, in page 258, line 18, column 3, at end insert
'and, in Group 8A, Note (5)'.

No. 50, in page 258, line 30, leave out first 'in' and insert
'of Group 6 of Schedule 5 to'.
No. 69, in page 263, line 38, column 3, after '4', insert
`in paragraph 1(2) the words "at the rate of 50 per cent.,".'.

No. 70, in page 263, line 41, column 3, after `property)'", insert
'in paragraph 3(2) the words "at the rate of 50 per cent.,".'.

No. 71, in page 263, line 46, column 3, at end insert
'Section 96(3)(e) and (4)'. —[Mr. Lilley.]

Order for Third Reading read.

Mr. Norman Lamont: I beg to move, That the Bill be now read the Third time.
There have been some notable features of this year's Finance Bill and of the debates that we have had, both upstairs and on the Floor of the House. One of these has been the extent to which the Opposition have been able to


agree with some of the purposes of the Bill. Certain provisions, such as that relating to unleaded petrol, have received the support of the Opposition and in other sectors they have shown their broad general approval. For that, I am grateful.
The other feature of the Bill is its length. It is the longest on record. Originally, it was 180 clauses and since then it has been lengthened. Some have criticised the length of the Bill, but I do not think that that criticism is valid. There is a good reason why it is a long Bill and that is that it contains many important and worthwhile measures. In particular, it demonstrates the Government's continuing commitment to tax reform.
The Bill contains important measures affecting pensions, savings and life assurance and some important simplification measures. An important part of the Bill, some 10 per cent., is occupied by measures to encourage employee participation schemes and wider share ownership. I think that these have commanded wide support on both sides of the House. The measure that I would single out for special mention is the new relief for employee share ownership trusts, or ESOPS, in which my hon. Friends the Members for Esher (Mr. Taylor) and for Carshalton and Wallington (Mr. Forman) have taken a special interest. The hon. Member for Newcastle upon Tyne, East (Mr. Brown) expressed his support and enthusiasm for the concept. This tax relief breaks new ground and we still want to see how it works in practice before considering whether any changes or improvements are needed. Already, there are 9 million shareholders, and I believe that the measures in the Bill will add to them.
Another major part of the Bill makes changes to pensions. A group of these changes has been designed to redress the balance between personal pensions and occupational pensions. Personal pensions are particularly suitable for younger people who are likely to move jobs, and they are the only form of pension savings available to the self-employed. For too long the tax system has put such people at a disadvantage, with the late starter not being able to make sufficient contributions to match the pension offered by final salary schemes. I am particularly pleased that we were able to accept the amendment moved by my hon. Friend the Member for Wyre Forest (Mr. Coombs), which raises the contribution limit for those aged over 60 to 40 per cent. This will go some way to improving the position of late entrants. Over 3¼ million personal pensions have been taken out, increasing private sector savings and putting the country's long-term finances on a firm footing. The measures in the Bill will ensure that personal pensions continue to flourish.
The ceiling on tax relief for pension saving has been debated thoroughly both inside and outside Parliament. I received many representations about this, and the more that I received, the more convinced I became that our approach is correct. The quid pro quo for getting marginal tax rates down has always been a reduction in tax rates. Generous reliefs were necessary when marginal rates were as high as 98 per cent., but with the generous and large cuts in the top rate of tax, this justification no longer holds. Other savings reliefs are subject to monetary limits. If we are not to create an unwarranted distortion in favour of institutional savings, a similar limit must be applied to pensions.
The cap of £60,000 was deliberately pitched at a level that would minimise disruption to pensions. As few as 50,000 employees have earnings in excess of the limit, and

few of them will be affected immediately because of the transitional provisions. We have heard in recent weeks a number of apocalyptic visions from interest groups that should know better. I would merely point out the example of the United States, where they have an earnings cap of $98,000, slightly over £60,000. Curiously, it, too, is indexed to prices.
I have been following with interest the extravagant claims made about the effect of the decision to adopt prices indexation. If earnings grow faster than inflation, it is true that over time the cap will gradually apply to an increasing number of people, but this needs to be kept in perspective. At present only a very few people earn more than £60,000 and, because of the very generous transitional arrangements, the initial impact of the cap will be small.
It is worrying to see experts in the pensions industry —whom I would expect to be good at arithmetic—making the claim that the cap will be eroded in a few years' time to £25,000 or so. This really is a strange claim. The fact is that the real value of the limit will be maintained at £60,000. It will not erode. That £60,000 is a large sum, and it will always be worth £60,000, at least in today's terms. In fact, because of the rounding formula it will move slightly ahead of straight prices indexation. I can conclude only that the National Association of Pension Funds and others have confused themselves with the logic of their attempts to bolster their case which, in any event, is unsustainable.
I find it curious that the pensions movement, which claims to represent several million scheme members, most of whom are on average earnings or below, should come out so strongly in favour of earnings indexation, bearing in mind that many of their member schemes do not even grant prices indexation to pensions, even where schemes have sizeable surpluses. I also recall the resistance of the pensions movement to improvements to such matters as early leavers' benefits, where the Government had to legislate to give ordinary scheme members a fair deal. I therefore find its criticism of the £60,000 cap very unappealing.
The really unsatisfactory feature of pensions provision is the millions of ordinary scheme members who do not receive a pension anywhere near the maximum allowable under the tax rules and those who retire on fixed pensions with no certainty of any cost of living increases and so see their living standards eroded. Moreover, some 10 million people are not covered by occupational schemes. I am forced to conclude that the pensions industry should concentrate its attention on those matters. I remain convinced that our measures are overwhelmingly justified.
The Bill is not just about those saving for retirement; it will also benefit those who have already retired. There are generous increases in the different age allowances and also in the rate at which the age allowance is withdrawn for those with incomes above the incomes limit.
At the beginning of my speech I referred to significant tax reforming measures, one of which is life assurance. Although the details sound, and indeed are, complex, the general approach has been straightforward—applying a lower rate of tax to a broader base, which is the general principle that we have applied to all our tax reforms.
A large part of the Bill—some 30 clauses—is concerned with the recommendations of the Keith report. This legislation brings us close to completing the total implementation of those recommendations. We have brought forward this measure only after the fullest


consultation. All along we have stressed the importance of balancing the powers of the Revenue with adequate safeguards for the taxpayers. Because of the care taken to consult the representative bodies and because of the publication of clauses, I feel sure that the balance is right.
The Bill provides relief for private medical insurance, an issue that we again debated today. At times I felt that the 180-clause Bill contained only that one measure. I do not want to overstate its importance at a cost of £40 million, compared with a planned increase of £5 billion in spending on the NHS over this year and next year. The relief will serve a useful role in meeting the higher cost faced by the elderly in paying for medical insurance at the very time when their incomes may be falling.
I have already referred to some of the measures intended to simplify the tax system. One is the repeal of the complex apportionment rules applying to close companies. When we reduced the top rates of tax last year, I felt that it was important to look for areas where we could simplify tax registration legislation. In principle, the apportionment rules applied to several hundred thousand close companies, required 20 pages of legislation and more than 200 pages of guidance for Inland Revenue officials. They have been replaced by much shorter provisions—four pages—which basically deny the benefit of the small companies rate of corporation tax to about 25,000 close companies. It is a simpler approach than the one contained in the Bill as first published, and I feel no need to be apologetic about that. Our proposals achieve the desired objective and represent worthwhile simplification. The measures now in the Bill are better than those that it incorporated when first published.
My hon. Friend the Member for Wanstead and Woodford (Mr. Arbuthnot) persuaded us to drop one measure relating to instruments of variation. His persuasive campaign convinced us that our proposals could be effectively avoided by people having good access to expert advice. However, we shall look to the possibility of introducing a better targeted measure next year.
There was cross-party agreement in Committee that the limits for exempt bingo, where duty is not payable, should be increased. We are grateful to the hon. Member for Wrexham (Dr. Marek) for raising that matter, and are pleased that we were able to produce measures that meet with the approval of both sides of the Committee.
Significant changes have also been made to the VAT measures, which my hon. Friend the Economic Secretary explained today. Right hon. and hon. Members in all parts of the House acknowledged the significance of those steps forward.
The Bill continues the programme of tax reform that has been very successful over the past decade—so successful that it has begun to influence even the Opposition's tax logic. However, as in so many other areas, the Opposition are proving to be somewhat slow and reluctant learners. Instead of accepting the logic of tax reform—that is, that if one rewards enterprise one gets more—they plan to stifle enterprise by restoring marginal rates of tax to levels which, if not confiscatory, would certainly be gratuitously penal.
The Bill is part of our alternative tax strategy that will continue to be followed by this country and its economy. It is the path to increased prosperity and to continuing high living standards. I commend the Bill to the House.

Mr. Beith: As the Financial Secretary said, features of the Bill command wide support and are welcome. They include the differential on lead-free petrol and extension of personal equity plan schemes—although we did not enjoy the support of Labour Members on that issue, it was one on which the Government and ourselves reached agreement, at least in respect of the proposed changes. The provisions for employee share ownership schemes are also welcome, and we have contributed to public discussion and argument on that subject over the years.
The features of the Bill that we particularly deplore include tax relief for private medical insurance, to which the Finance Secretary has just referred. That represents the diversion of a substantial sum of money that the Health Service could use for direct health care largely for private insurance and to benefit people who already take out such insurance without any tax incentive. We deplore also retrospective features of detailed taxation matters, which at least excited some interest among Conservative Members. The hon. Member for Tatton (Mr. Hamilton) spoke eloquently on that subject, and we join forces with him in criticising the Government for their selective, retrospective legislation.
The Bill is notable for its omissions. It embodies no logical policy on alcohol and tobacco excise duties, despite inflation. Presumably it is Government policy to reduce the price of alcohol and tobacco, and the tax take, over the years. The Bill contains no provisions to deal with the tax anomaly relating to workplace nurseries and to nursery care. Nor is there any commitment, beyond that relating to PEPs, to encourage small savers.
Our most serious criticism is that the Bill is not really a serious piece of tax reform legislation. It does not address the fundamental problems of the relationship between income tax and national insurance. Nor does it resolve this country's capital taxation problems, whereby there is an almost voluntary inheritance tax for the well-advised. The Bill shirks, as the Government have shirked, the major issues of tax reform which, if addressed, could lead to a more just and fair society.
The Bill has been criticised for being overlong, but that is not a reasonable criticism to make of a Bill that deals with such a wide range of matters. However, criticism can be made of the way that the Bill deals with certain technical matters. I refer to the proposals from the Keith committee, which, because they were the subject of extensive discussion, passed very smoothly through the House and did not give rise to any difficulties in Committee.
That was a good way in which to proceed, but it became apparent during consideration of the Bill that the same care was not being taken over other parts. Amendments were tabled at a late stage; a Ways and Means resolution brought us back to the Floor of the House to deal with changes in the Bill; companies and others professionally involved in the legislation were having to make decisions related to the tax regime for the current tax year, while provisions for that regime were being amended daily.
I do not criticise the Government for responding to representations that they received—and, in some cases, dropping clauses from the Bill: for example, they abandoned their proposals on deeds of arrangement for wills. How much better it would be, however, to make such proposals in time to allow proper consultation, and, perhaps, to publish them in a separate technical Finance Bill. I have made that suggestion before: it is one of the ways in which the Government could ensure that structural changes in the tax system—which are bound to be complicated, and some of which the Government are bound to get wrong first time—could be addressed more carefully.
There is no sense in dealing with complex and expensive provisions involving large numbers of employees out in the real world in such a way that unsatisfactory last-minute revisions must be made. These were not proposals that had to be implemented at midnight on Budget day; they could have been brought forward long before.
When I vote against the Government tonight I shall do so not only because I am critical of the Bill, but because the Government have presented it while its members are deeply at odds over the most fundamental issues of economic policy. The Bill is but the window dressing. The Government still do not know their attitude to the major European issues of economic policy. Let me tell them that, for most people, perfecting our relationship with the European Community and establishing our position on the exchange rate mechanism and European economic co-operation are far more important than the details of the Finance Bill. A Government who are so at sea over major economic issues are bound to get the minor details wrong as well.

Mr. Tim Boswell: Apart from one area of significant disagreement, the Bill has been essentially one for the connoisseur, or alternatively the technician. It was a pleasure to serve on the Committee, and I am pleased to commend the Bill to the House.
If I have any substantial criticism other than those already dealt with, it is that in Committee we heard rather too many cliches such as "level playing fields" and "ring fencing". My hon. Friend the Member for Corby (Mr. Powell) and I have suggested that they may provide a fruitful source of taxation for the Chancellor in future years if those who use them are mulcted for the pleasure of doing so.
The Bill has been marked by the number of concessions that the Government have made, some—like those on the variation of wills—achieved through the excision of whole clauses. Several are of staggering complexity: I believe that concessions have been made to interests that I represent, but I am unable to understand exactly what they are. Nevertheless, I am grateful for them.
I believe that the Bill has made out a case for increasingly advanced consultation, such as has been carried out on the taxation of life assurance. A case is also beginning to build up for a technical Finance Bill to be presented in the autumn, so that some of the more detailed matters can be taken out. One or two items remain for another day—such as the treatment of forestry—but I am content to rely on the right decision emerging in due

course, rather than being rushed into. I am sure that my right hon. Friend will have noted the points that have been made during our debates.
Essentially, the Bill has been one of detail and of fine print. It exemplifies the progress of the Treasury as a stately galleon under more or less full sail, dropping a little in one place and putting on more sail in another.
If we are honest, those of us who participate in the annual voyage on the Standing Committee have enjoyed the process, as we always do. We look forward to further battles of this nature on a subsequent Bill. I have pleasure in commending this one to the House.

Mr. Nicholas Brown: At the beginning of the Committee stage of the Bill I heard a Conservative Member describe something as dull but worthy. At the time I thought that that was a harmless speculation about the future of the Paymaster General. It was not. It was Back-Bench opinion of the Bill—dull but worthy. At our first sitting on 11 May we discovered that that was the Front-Bench view of the Bill, too. The Economic Secretary asked the Committee, "Have I spoken?". When hon. Members said no, he said:
My words are so unmemorable that I cannot remember what I said."—[Official Report, Standing Committee G, 11 May 1989; c. 19.]
The Committee stage proceeded at roughly that pitch of excitement, taking the same number of days to complete its Committee stage as did the more controversial Bill that was before us last year.
The Bill has not been characterised by the same high degree of controversy, but it contains a much wider range of measures of varying degrees of importance and contentiousness. From the outset the Labour party had to judge how best the issues were to be approached in Committee. We decided that the principles underlying each Government proposal should be thoroughly explored in Committee and, where necessary, opposed. However, we deliberately did not turn the Committee into the parliamentary equivalent of the battle of the Somme. We wanted to ensure that the clauses were explored in detail and that detailed issues could be considered during the discussion on subsequent clauses.
The fact that the Government's oft-proclaimed radicalism does not leap from the pages of the Finance Bill can be explained more significantly than anywhere else if one looks at clause 28, which sets the rate of income tax. The rate remains unchanged, not because the Government do not believe that it should be reduced further—they are still ideologically committed to increasing indirect taxation and decreasing direct taxation—but because, as with so much else of their ideological Budget, it cannot practically be carried out in the face of the economic storms that currently beset the Chancellor of the Exchequer. This year's standstill is an admission of last year's mistakes. This year's standstill confirms the accuracy of the warnings that the Opposition gave last year. Top rate tax cuts, combined with the liberalisation of credit and substantial pay increases for high earners, way in excess of the national average for pay settlements, has produced a large balance of payments deficit and led to wage inflation.
Equally important, as my hon. Friend the Member for Clydebank and Milngavie (Mr. Worthington) said when we debated these matters in Committee, the Government's tax changes are socially unjust. They have widened the gap in wealth between the most affluent 10 per cent of our population and the rest. As my hon. Friend pointed out,


it is the poorest who have been hit the hardest, despite the Government's claim that they are targeting help on those who need it most. Perhaps that is what the Government are doing, but let nobody be in any doubt that, when the Government say that they are giving money to those who need it most, their definition of those who need it most is quite different from the one that is applied by the rest of us.
We condemn the economic policies and the social attitudes that form the background to the Bill. However, as the Financial Secretary perfectly fairly pointed out, there are aspects of the Bill that we support. The proposals relating to unleaded petrol, the concessions on the age allowance, and the change in the earnings rule for pensioners are all welcome. Nevertheless, as my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) said, the needs of our citizens of pensionable age should be addressed by the Government through mechanisms other than just the tax system. I see no sign that the Government intend to do anything of the sort.
Similarly, the implementation of a large number of the recommendations of the Keith committee in the Finance Bill is welcome. What may become known as the Ron Plummer and Roy Tucker memorial clauses deal with the Keith committee's recommendations on tax avoidance. In Committee, there were times when I felt that the heart of the Conservative party was not wholly in the tax avoidance measures. When Conservative Members spoke of standing up for the little people, I had the impression that they were thinking more of the "diddymen" than of small business men in their constituencies. Later in the proceedings, Conservative Back-Bench Members so vigorously defended the democratic and apparently inalienable right of British citizens to have their wills rewritten for tax purposes after they had died that the clause suggesting that that should no longer be allowed was voted out of existence by the Conservative party, despite the fact that the Conservative party was committed to the clause on Second Reading.
That brings me to a rather peculiar phenomenon. I am ashamed to tell the House that the Financial Secretary to the Treasury succeeded in defeating more clauses in the Bill than have the official parliamentary Opposition. It is not surprising that the Chancellor of the Exchequer came up to the Committee to check on the progress of the Bill. Clearly he was checking that the Chief Secretary was getting the Bill through before the Financial Secretary could get more of its contents defeated. I should not be unfair to the Financial Secretary, but I must be a little unfair to him because his craven surrender to the interests of property developers in his climbdown on the close company apportionment proposals was not one of his more heroic parliamentary performances. Nor did he win our admiration with his abject failure to protect the legitimate interests of the Inland Revenue in the argument about inheritance tax and whether dead people should be allowed to rewrite their wills.
As with last year's Finance Bill, the greatest part of the Government's work load was carried by the Financial Secretary. As I said last year, discussing the Finance Bill without the Financial Secretary is like discussing Hamlet without the ham. This year, the Financial Secretary's robust impersonation of the late Tony Hancock

impersonating a union leader was enjoyed by the entire Committee when we discussed employee share ownership trusts. His moving speech in favour of workers' control will be remembered by the Opposition for some time. He said:
If the increasing awareness of and interest in ESOPs results in more worker-owned companies, I should not regret that."—[Official Report, Standing Committee G; 6 June 1989, c. 304.]
We all cheered him. However, later he let us down. How could the man described by Michael White in The Guardian as the perennial bridesmaid be so despondent about his chances of future preferment that yesterday he felt unable to accept our new clause about workplace nurseries?
In legislation often the smaller issues, not the big ones, give the game away. Will the Government be able to reduce the rate of inflation? There is a clue in the Finance Bill. The Bill deletes the phrase "higher paid" from a description of employees who earn £8,500 or more. That shows the direction of the Government's thinking.
Finally, I shall deal with what the Government claim as their stated objective in taxation policy. They say that they have two main objectives: to cut allowances and to reduce the rate of direct taxation. The Bill introduces the much-denounced provision for a new tax relief—the new allowance for private medical insurance for pensioners. The Financial Secretary said that we did not like it and that we had roundly denounced it. He was certainly right about that. He also denounced the fact that the allowance was introduced with all the paraphernalia that it is claimed surround the present MIRAS scheme. That allowance is intended to be bedded into the taxation system, and that is wrong.
Last year the Financial Secretary said that the Finance Bill was a watershed. This year, with its unstated condemnation of last year's watershed, it is bound to be regarded as the Government's dull and worthy tombstone.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 266, Noes 204.

Division No. 296
at 9.59 pm


AYES


Adley, Robert
Bottomley, Mrs Virginia


Aitken, Jonathan
Bowden, A (Brighton K'pto'n)


Alexander, Richard
Bowden, Gerald (Dulwich)


Alison, Rt Hon Michael
Bowls, John


Allason, Rupert
Boyson, Rt Hon Dr Sir Rhodes


Amery, Rt Hon Julian
Braine, Rt Hon Sir Bernard


Amess, David
Brandon-Bravo, Martin


Amos, Alan
Brazier, Julian


Arnold, Jacques (Gravesham)
Brooke, Rt Hon Peter


Ashby, David
Brown, Michael (Brigg &amp; Cl't's)


Aspinwall, Jack
Bruce, Ian (Dorset South)


Atkins, Robert
Burns, Simon


Baker, Nicholas (Dorset N)
Burt, Alistair


Baldry, Tony
Butcher, John


Banks, Robert (Harrogate)
Butler, Chris


Batiste, Spencer
Butterfill, John


Beaumont-Dark, Anthony
Carlisle, John, (Luton N)


Bellingham, Henry
Carlisle, Kenneth (Lincoln)


Bendall, Vivian
Carrington, Matthew


Bennett, Nicholas (Pembroke)
Carttiss, Michael


Bevan, David Gilroy
Chapman, Sydney


Biffen, Rt Hon John
Chope, Christopher


Blackburn, Dr John G.
Clark, Dr Michael (Rochford)


Body, Sir Richard
Clark, Sir W. (Croydon S)


Bonsor, Sir Nicholas
Clarke, Rt Hon K. (Rushcliffe)


Boscawen, Hon Robert
Colvin, Michael


Boswell, Tim
Conway, Derek


Bottomley, Peter
Coombs, Anthony (Wyre F'rest)






Coombs, Simon (Swindon)
Janman, Tim


Cope, Rt Hon John
Jessel, Toby


Couchman, James
Johnson Smith, Sir Geoffrey


Cran, James
Jones, Gwilym (Cardiff N)


Currie, Mrs Edwina
Jones, Robert B (Herts W)


Curry, David
Jopling, Rt Hon Michael


Davies, Q. (Stamf'd &amp; Spald'g)
Key, Robert


Davis, David (Boothferry)
King, Roger (B'ham N'thfield)


Day, Stephen
Knapman, Roger


Devlin, Tim
Knight, Dame Jill (Edgbaston)


Dicks, Terry
Knowles, Michael


Dorrell, Stephen
Knox, David


Douglas-Hamilton, Lord James
Lamont, Rt Hon Norman


Dover, Den
Latham, Michael


Durant, Tony
Lawrence, Ivan


Dykes, Hugh
Lawson, Rt Hon Nigel


Eggar, Tim
Lennox-Boyd, Hon Mark


Emery, Sir Peter
Lester, Jim (Broxtowe)


Evans, David (Welwyn Hatf'd)
Lightbown, David


Evennett, David
Lilley, Peter


Fairbairn, Sir Nicholas
Lloyd, Sir Ian (Havant)


Fallon, Michael
Lloyd, Peter (Fareham)


Favell, Tony
Lord, Michael


Field, Barry (Isle of Wight)
Lyell, Sir Nicholas


Finsberg, Sir Geoffrey
Macfarlane, Sir Neil


Fishburn, John Dudley
MacGregor, Rt Hon John


Fookes, Dame Janet
MacKay, Andrew (E Berkshire)


Forman, Nigel
McLoughlin, Patrick


Forsyth, Michael (Stirling)
McNair-Wilson, Sir Michael


Forth, Eric
McNair-Wilson, Sir Patrick


Fowler, Rt Hon Norman
Major, Rt Hon John


Franks, Cecil
Malins, Humfrey


Freeman, Roger
Mans, Keith


French, Douglas
Maples, John


Fry, Peter
Marland, Paul


Gale, Roger
Marshall, John (Hendon S)


Gardiner, George
Marshall, Michael (Arundel)


Garel-Jones, Tristan
Martin, David (Portsmouth S)


Gill, Christopher
Mates, Michael


Glyn, Dr Alan
Maude, Hon Francis


Goodhart, Sir Philip
Mawhinney, Dr Brian


Goodson-Wickes, Dr Charles
Maxwell-Hyslop, Robin


Gow, Ian
Mayhew, Rt Hon Sir Patrick


Grant, Sir Anthony (CambsSW)
Mellor, David


Greenway, Harry (Ealing N)
Miller, Sir Hal


Green way, John (Ryedale)
Mills, Iain


Gregory, Conal
Mitchell, Andrew (Gedling)


Griffiths, Sir Eldon (Bury St E')
Mitchell, Sir David


Griffiths, Peter (Portsmouth N)
Montgomery, Sir Fergus


Ground, Patrick
Moore, Rt Hon John


Gummer, Rt Hon John Selwyn
Morris, M (N'hampton S)


Hague, William
Morrison, Sir Charles


Hamilton, Neil (Tatton)
Morrison, Rt Hon P (Chester)


Hampson, Dr Keith
Moss, Malcolm


Hanley, Jeremy
Moynihan, Hon Colin


Hannam, John
Mudd, David


Hargreaves, A. (B'ham H'll Gr')
Neale, Gerrard


Hargreaves, Ken (Hyndburn)
Needham, Richard


Harris, David
Nelson, Anthony


Haselhurst, Alan
Neubert, Michael


Hawkins, Christopher
Nicholls, Patrick


Hayes, Jerry
Nicholson, David (Taunton)


Hayward, Robert
Nicholson, Emma (Devon West)


Heathcoat-Amory, David
Norris, Steve


Heddle, John
Onslow, Rt Hon Cranley


Heseltine, Rt Hon Michael
Oppenheim, Phillip


Hicks, Robert (Cornwall SE)
Paice, James


Higgins, Rt Hon Terence L.
Parkinson, Rt Hon Cecil


Hind, Kenneth
Patnick, Irvine


Hogg, Hon Douglas (Gr'th'm)
Pattie, Rt Hon Sir Geoffrey


Howard, Michael
Peacock, Mrs Elizabeth


Howarth, G. (Cannock &amp; B'wd)
Porter, Barry (Wirral S)


Howell, Rt Hon David (G'dford)
Porter, David (Waveney)


Hughes, Robert G. (Harrow W)
Powell, William (Corby)


Hunt, David (Wirral W)
Price, Sir David


Hunt, Sir John (Ravensbourne)
Raffan, Keith


Hurd, Rt Hon Douglas
Raison, Rt Hon Timothy


Irvine, Michael
Redwood, John


Irving, Charles
Renton, Tim


Jack, Michael
Riddick, Graham





Ridley, Rt Hon Nicholas
Stewart, Andy (Sherwood)


Ridsdale, Sir Julian
Stokes, Sir John


Roberts, Wyn (Conwy)
Stradling Thomas, Sir John


Roe, Mrs Marion
Sumberg, David


Rossi, Sir Hugh
Summerson, Hugo


Rost, Peter
Tapsell, Sir Peter


Rowe, Andrew
Taylor, Ian (Esher)


Ryder, Richard
Taylor, John M (Solihull)


Sackville, Hon Tom
Tebbit, Rt Hon Norman


Sainsbury, Hon Tim
Thompson, D. (Calder Valley)


Sayeed, Jonathan
Thorne, Neil


Shaw, David (Dover)
Thornton, Malcolm


Shaw, Sir Giles (Pudsey)
Trippier, David


Shephard, Mrs G. (Norfolk SW)
Waddington, Rt Hon David


Shepherd, Colin (Hereford)
Walker, Bill (T'side North)


Skeet, Sir Trevor
Wardle, Charles (Bexhill)


Smith, Tim (Beaconsfield)
Watts, John


Soames, Hon Nicholas
Wells, Bowen


Speller, Tony
Wheeler, John


Spicer, Sir Jim (Dorset W)
Widdecombe, Ann


Spicer, Michael (S Worcs)
Winterton, Mrs Ann


Stanbrook, Ivor
Winterton, Nicholas


Stanley, Rt Hon Sir John
Wood, Timothy


Steen, Anthony



Stern, Michael
Tellers for the Ayes:


Stevens, Lewis
Mr. Alan Howarth and


Stewart, Allan (Eastwood)
Mr. David Maclean.


NOES


Abbott, Ms Diane
Dixon, Don


Adams, Allen (Paisley N)
Dobson, Frank


Allen, Graham
Doran, Frank


Anderson, Donald
Dunnachie, Jimmy


Archer, Rt Hon Peter
Dunwoody, Hon Mrs Gwyneth


Ashdown, Rt Hon Paddy
Eadie, Alexander


Ashton, Joe
Eastham, Ken


Barnes, Harry (Derbyshire NE)
Ewing, Mrs Margaret (Moray)


Beckett, Margaret
Fatchett, Derek


Beith, A. J.
Field, Frank (Birkenhead)


Benn, Rt Hon Tony
Fields, Terry (L'pool B G'n)


Bennett, A. F. (D'nt'n &amp; R'dish)
Fisher, Mark


Bermingham, Gerald
Flannery, Martin


Bidwell, Sydney
Flynn, Paul


Blair, Tony
Foot, Rt Hon Michael


Blunkett, David
Foster, Derek


Boateng, Paul
Foulkes, George


Boyes, Roland
Fraser, John


Bradley, Keith
Fyfe, Maria


Bray, Dr Jeremy
Galbraith, Sam


Brown, Gordon (D'mline E)
Garrett, John (Norwich South)


Brown, Nicholas (Newcastle E)
Gilbert, Rt Hon Dr John


Bruce, Malcolm (Gordon)
Godman, Dr Norman A


Buckley, George J.
Golding, Mrs Llin


Caborn, Richard
Gould, Bryan


Callaghan, Jim
Graham, Thomas


Campbell, Menzies (Fife NE)
Grant, Bernie (Tottenham)


Campbell, Ron (Blyth Valley)
Griffiths, Nigel (Edinburgh S)


Campbell-Savours, D. N.
Griffiths, Win (Bridgend)


Canavan, Dennis
Grocott, Bruce


Carlile, Alex (Mont'g)
Hardy, Peter


Clark, Dr David (S Shields)
Harman, Ms Harriet


Clarke, Tom (Monklands W)
Hattersley, Rt Hon Roy


Clay, Bob
Henderson, Doug


Clelland, David
Hinchliffe, David


Clwyd, Mrs Ann
Hoey, Ms Kate (Vauxhall)


Cohen, Harry
Home Robertson, John


Coleman, Donald
Hood, Jimmy


Cook, Frank (Stockton N)
Howarth, George (Knowsley N)


Cook, Robin (Livingston)
Howell, Rt Hon D. (S'heath)


Cousins, Jim
Howells, Geraint


Cox, Tom
Howells, Dr. Kim (Pontypridd)


Cryer, Bob
Hoyle, Doug


Cummings, John
Hughes, John (Coventry NE)


Cunliffe, Lawrence
Hughes, Robert (Aberdeen N)


Dalyell, Tam
Hughes, Roy (Newport E)


Darling, Alistair
Hughes, Simon (Southwark)


Davies, Rt Hon Denzil (Llanelli)
Illsley, Eric


Davies, Ron (Caerphilly)
Ingram, Adam


Davis, Terry (B'ham Hodge H'I)
Janner, Greville


Dewar, Donald
Jones, Barry (Alyn &amp; Deeside)






Jones, Ieuan (Ynys Môn)
Martin, Michael J. (Springburn)


Jones, Martyn (Clwyd S W)
Martlew, Eric


Kaufman, Rt Hon Gerald
Maxton, John


Kinnock, Rt Hon Neil
Meacher, Michael


Kirkwood, Archy
Meale, Alan


Lambie, David
Michael, Alun


Lamond, James
Michie, Bill (Sheffield Heeley)


Leadbitter, Ted
Michie, Mrs Ray (Arg'l &amp; Bute)


Lestor, Joan (Eccles)
Mitchell, Austin (G't Grimsby)


Lewis, Terry
Moonie, Dr Lewis


Litherland, Robert
Morgan, Rhodri


Livsey, Richard
Morley, Elliott


Lloyd, Tony (Stretford)
Morris, Rt Hon A. (W'shawe)


Lofthouse, Geoffrey
Morris, Rt Hon J. (Aberavon)


Loyden, Eddie
Mowlam, Marjorie


McAllion, John
Mullin, Chris


McAvoy, Thomas
Murphy, Paul


McCartney, Ian
O'Brien, William


Macdonald, Calum A.
O'Neill, Martin


McFall, John
Orme, Rt Hon Stanley


McKelvey, William
Parry, Robert


McLeish, Henry
Pendry, Tom


McNamara, Kevin
Pike, Peter L.


Madden, Max
Powell, Ray (Ogmore)


Mahon, Mrs Alice
Prescott, John


Marek, Dr John
Primarolo, Dawn


Marshall, David (Shettleston)
Quin, Ms Joyce


Marshall, Jim (Leicester S)
Radice, Giles





Randall, Stuart
Taylor, Mrs Ann (Dewsbury)


Redmond, Martin
Taylor, Matthew (Truro)


Rees, Rt Hon Merlyn
Thompson, Jack (Wansbeck)


Reid, Dr John
Turner, Dennis


Richardson, Jo
Vaz, Keith


Robertson, George
Wall, Pat


Robinson, Geoffrey
Wallace, James


Rogers, Allan
Walley, Joan


Ross, Ernie (Dundee W)
Wareing, Robert N.


Rowlands, Ted
Watson, Mike (Glasgow, C)


Ruddock, Joan
Welsh, Andrew (Angus E)


Sedgemore, Brian
Welsh, Michael (Doncaster N)


Sheldon, Rt Hon Robert
Wigley, Dafydd


Shore, Rt Hon Peter
Williams, Rt Hon Alan


Short, Clare
Williams, Alan W. (Carm'then)


Skinner, Dennis
Wilson, Brian


Smith, Andrew (Oxford E)
Winnick, David


Smith, C. (Isl'ton &amp; F'bury)
Wise, Mrs Audrey


Smith, Rt Hon J. (Monk'ds E)
Worthington, Tony


Smith, J. P. (Vale of Glam)
Wray, Jimmy


Soley, Clive
Young, David (Bolton SE)


Spearing, Nigel



Steinberg, Gerry
Tellers for the Noes:


Strang, Gavin
Mr. Frank Haynes and


Straw, Jack
Mr. Allen McKay.

Question accordingly agreed to.

Bill read the Third time, and passed.

Irradiation of Food

Mr. Speaker: I have selected the amendment in the name of the Leader of the Opposition.

The Minister of Agriculture, Fisheries and Food (Mr. John MacGregor): I beg to move,
That this House takes note of European Community Document No. 10377/88, relating to irradiation of foodstuffs; and supports the Government's intention to seek to ensure that a directive is adopted that will allow the use of the process under conditions that will fully safeguard the interests of the consumer.
I announced in the House on 21 June that the Government intended to provide for the irradiation of some foods in this country. I made it clear then that we regarded this process as a useful additional weapon in our large armoury of measures and activities aimed at ensuring food safety—I stress, only one of many.
That takes me straight to the flaw in the second half of the Opposition's amendment, stating that they believe that
improving regulations and monitoring along the food chain are the best ways of solving the current epidemic of food poisoning".
We monitor constantly. We regularly improve regulations whenever necessary. That happens anyway, but irradiation adds one further benefit—one further improvement in regulations and systems—which is why it is right that we should now make it available.
I said on 21 June that our approach was to extend consumers' freedom of choice by making available for those foods for which it is suitable this extension to the range of preservation processes that can be used to keep food safe.
I emphasised that I was well aware that it is only suitable for some foods and should he available only for them, and that no one in Government had ever claimed or would claim that it could be used across the whole range of food to deal with all forms of microbial contamination. Above all, I underlined that it will be a matter of freedom of choice for the consumer, because there will be full and clear labelling of foods that have received this treatment. No one, whether primary producer, manufacturer, retailer or consumer, will have to use irradiation or eat irradiated food if they do not wish to.
Our whole approach in making available this additional option to the consumer and to the food industry is based fundamentally on food safety and consumer grounds. Tonight we are debating the European Commission's proposals for harmonising the laws on food irradiation across the whole Community—and here again consumer considerations are well to the forefront.
Just as in the United Kingdom, we adopted a cautious attitude to food irradiation, setting up our own independent expert scientific assessment of the process, rather than simply acting on the basis of the international work carried out for the World Health Organisation and the Food and Agriculture Organisation. So too did the European Commission. The considerable data on this subject were re-evaluated by the European Community Scientific Committee for Food before this proposal was put forward.
Like the international committees and the United Kingdom's own independent committee, the European Community committee was entirely satisfied as to the safety and wholesomeness of irradiated food up to the

overall average dose of 10 kilogray. The one difference of approach favoured by the European Community Committee has been that it recommended restriction to a particular list of foodstuffs for which a technological need had been demonstrated. Essentially, that meant that it recommended restrictions to those foodstuffs already accepted by one or other of the member states. Our preferred approach—like that of the World Health Organisation—has been to argue that the licence issued to a particular firm should set out the particular foodstuffs and the treatments that could be applied to them. This approach is slightly different from that recommended by the European Community Scientific Committee for Food, but essentially would involve the same degree of official control.
The heart of the directive is in four articles—5 to 8—which contain the essential control conditions. Article 5 makes labelling mandatory. This is an absolute must and we shall see to it in our discussions with our partners that clear and precise requirements are laid down.
Article 6 requires member states to provide for prior approval of applications to use the process and subsequent monitoring of compliance with the conditions by a competent authority. As the House will be aware, we are proposing to exercise this control within central Government. Article 6 also stipulates that approval shall be given only if the plant meets the requirements of the relevant Codex recommended international code of practice, which covers detailed design and operational aspects of the irradiation plant and premises. We have no difficulty with that—we would recommend the same.

Mr. Ivor Stanbrook: How will a customer in a restaurant know whether the food that is served has been irradiated?

Mr. MacGregor: As I made clear in exchanges in the House the other day, we shall have to include that point when we come to the detailed regulations to ensure that the customer does know.

Several Hon. Members: rose—

Mr. MacGregor: In view of the shortness of the debate, it would be better if I did not give way again because I know that many hon. Members wish to speak and my hon. Friend the Member for Mid-Norfolk (Mr. Ryder) will answer their points when he replies to the debate.
Article 7 lays down detailed documentation requirements and article 8 provides for imports to be permitted only from countries that can demonstrate to the Community that they comply with equivalent conditions and achieve equal standards. The article envisages inspection of irradiation plants in third countries and the listing of officially approved establishments there.
These are the core conditions of the draft directive and, as the House will readily appreciate, they are in line with our recommendations for a control framework for this country and so they clearly form an acceptable basis for the detailed discussions that will be necessary. We shall, of course, examine closely just how the provisions should be applied in practice. I can assure the House therefore that we shall be taking a close look at the criteria to be applied by approving authorities; at the conditions that will be laid down when approvals are granted; at the matters to be examined during official inspections; and at the circumstances in which approvals will be withdrawn or


modified if conditions are found on inspection not to be fully met. We shall also need to look carefully at the record-keeping requirements and at details of the labelling provisions. For imports, we shall need to scrutinise with particular care the Commission's proposals for measuring the equivalence of the controls and the standards of third countries.
In short, we are concerned to get all the arrangements right to ensure that the essential aim of consumer protection is fully met and that there is uniform application of conditions across the whole Community.
Some people no doubt will attempt to argue that consumers have said that they do not want irradiated food on the market. Such market research as has been done so far and which I have seen—it is far from complete—does, indeed, suggest that many consumers will not want to use irradiated food at least in the early stages. That is fair enough; no one has ever suggested they should have to. On the other hand, a sizeable number have also said that they would like the opportunity and wish to make use of it. This is entirely in accord with the Government's approach. Given the proper controls, we see no reason why they should now be denied that opportunity.
Moreover, it is worth remembering what consumer bodies such as the National Consumer Council are saying. The NCC has explicitly accepted the safety of food irradiation properly applied and monitored—as we shall ensure that it is. It has pointed to the need for nutritional monitoring. We have already said that we shall build this into the on-going "food-watch" that we maintain. The NCC statement stresses also that irradiation must form simply one part of a comprehensive approach to the safety of food and must never be regarded as a substitute for good manufacturing practice. My statement in the House last month has already made clear that this is also the firm position of the Government.
I turn now in what is inevitably a short debate to what I regard as the misconceptions and myths which are being raised both about the process itself and about what it can do. It appears that some people still fear that food irradiation will make food radioactive. They are, however, confusing irradiation with fall out of radioactive substances—which is entirely different. Moreover, they overlook the fact that radioactivity is actually present anyway—in the environment, in food, and, indeed, in all of us.
The most graphic rebuttal of the radioactivity argument that I have seen is in the report of the European Community's Scientific Committee for Food to which I referred earlier. The committee referred to studies carried out to show how much radioactivity could be induced by that process. Those studies, which relate to the energy and dose levels that would apply to food irradiation, showed that the amount of radioactivity produced—and I quote from the report—
is below the detection threshold".
Indeed, that infinitesimal extra amount of radioactivity is, according to the committee, approximately 100,000-fold smaller than the level that occurs naturally in fresh foods. That puts the subject properly in its context and needs to be emphasised time and time again—it is 100,000-fold smaller.
Some comments currently being reported seem also to be based on the mistaken assumption that the process can

disguise sub-standard food. Let me emphasise once again that food irradiation cannot reverse the natural ageing processes of food. If the food is sub-standard, it will remain so. Irradiation cannot disguise the natural signs that food has gone off. It will not improve appearance; it will not cover up unpleasant odours; and it cannot take away a nasty taste. The process, in other words, cannot make good food which is bad in those ways.
In any case, the Government are quite clear that food irradiation shall be applied only to food in normal, sound condition. We propose to build into our controls a requirement for checks to be made on the food before it is treated.
Some people claim that irradiation cannot make any contribution to the avoidance of botulism. I simply do not know why that point is being raised, because no one has ever claimed that it could. What we have said is that it had a useful contribution to make by killing large numbers of salmonella, campylobacter and listeria bacteria. That is where the particular effectiveness of food irradiation has been demonstrated, and that is the benefit that we want to make available to consumers. It is also, of course, one of the prime food safety concerns in certain foods. So let us concentrate on the real targets, which are very important ones, and not on false targets for which irradiation is not appropriate in the first place.
There is another aspect, too, on which I want to set the record straight. I have seen several newspaper reports which say that food irradiation will not prove effective in reducing the threat posed by salmonella and campylobacter. In some accounts, that is said to be because the bacteria will leave behind toxins and that those will do the damage. In other accounts, it is stated that those bacteria will produce spores that the process cannot touch and that further bacteria will grow from the spores. I am advised that, quite simply, that is scientific nonsense. Salmonella, campylobacter, and listeria are non-sporing bacteria and they do not excrete toxins into food. The illness that is caused results directly from consuming the bacteria themselves. If the bacteria are killed off, the threat that they pose is eliminated. Helping deal with that, which irradiation does, undoubtedly makes a very worthwhile contribution to the reduction of food-borne illness.
Another odd argument is that the process will not achieve much because it cannot be used to protect eggs. Again no one ever said that it could. But what it can do through its effectiveness in killing bacteria is to enhance safety standards in poultry meat, in some shell-fish and in herbs and spices. Of course, it cannot be used for all foods, but that is no argument for failing to take advantage of it where it can be useful.

Mr. Michael Shersby: Will my right hon. Friend give way?

Mr. MacGregor: No, I had better move on, because several hon. Members wish to speak.
On the subject of herbs and spices, there is of course a particular advantage to the public in the use of that process. At the moment the decontamination needed by those products—because of the conditions in which they have to be stored in the countries of origin—is by fumigation with ethylene oxide gas. It is essential to replace the use of that chemical because of its possible adverse effects. Its use will be banned within the European Community from the end of 1990. The only effective


alternative for the treatment of herbs and spices is irradiation. Irradiation of herbs and spices thus involves the replacement of a treatment that is causing concern.
Another fallacious objection is that it is wrong to be thinking of introducing the process now, when research has so far not come up with a detection test. I have to say that the heavy weight of informed opinion takes the opposite view. The World Health Organisation, the Codex Alimentarius Commission, the United States Food and Drug Administration—indeed, the Governments of 35 different countries—have concluded, after detailed scientific consideration, that adequate control can be achieved over the use of the process through a strict system of licensing and official inspections of operations and of records. The view of our own independent scientific inquiry by the Advisory Committee on Irradiated and Novel Foods was that a detection test could provide a useful supplement to the control mechanism, but satisfactory controls could be maintained without this. The Government have accepted this conclusion—though we shall, of course, continue to pursue the research that we are funding with the aim of producing suitable tests.
Import controls are a matter of particular importance in the overall control regime for food irradiation. I can assure the House that we shall support the imposition of strict, Community-wide controls, with detailed documentation and labelling requirements, to give the necessary reassurance to the consumer on the quality of irradiated foodstuffs whether treated here or at approved, officially controlled premises overseas.

Mr. Frank Cook: That has not worked thus far.

Mr. MacGregor: I invited the hon. Gentleman to provide me with his evidence on this and I am going through it. He knows that I am doing precisely that. I do not believe that his evidence adds up to the charge that he has just made, but it is up to him to give further evidence, if he thinks that he can find it.
When we have the ban on irradiation lifted in this country, to which I hope the House will agree, and we have suitable controls for certain products and it is Community-wide, the imposition of strict Community-wide controls will be important.
I have spoken of the benefits for consumers in making available the option of food irradiation as an additional measure to protect the safety of those foods for which the process is suitable. I have drawn particular attention to the effectiveness that the process has demonstrated in relation to salmonella, campylobacter, and listeria—those bacteria cause the vast majority of food-borne illness. In the case of salmonella and campylobacter the process could have particular value in being applied to poultrymeat.
I have mentioned also the benefit that consumers would gain from the irradiation of herbs and spices, in relation to which the process would provide a much safer way of achieving insect and bacterial decontamination than the present chemical fumigation methods which will, in any case, shortly no longer be available for use.
There is, of course, further benefit in fruits whose season is longer and which will keep for longer in the home. Extension of shelf-life is usually referred to as a benefit for the retail trade. So it is, no doubt, but we must not forget that larders and kitchens have shelves also. If goods last longer, then this clearly helps the consumer as

well. But that is an additional benefit. It is not among my reasons for proposing the lifting of the ban, which are based solely on food safety and consumer choice grounds.
For all those reasons, the Government welcome the Commission's initiative in proposing harmonised rules for food irradiation. As I have stated, the draft directive's proposals for a control system are very largely compatible with the proposals that we had ourselves outlined. Clearly, we shall need to examine in detail the implications and the precise application of the draft. The general framework—relying as it does on the Codex code of practice—is clearly fundamentally correct and should provide a firm basis for detailed control conditions that will fully safeguard the interests of the consumer. I assure the House that the Government will be both diligent and vigilant in ensuring that this essential requirement is met. I commend the motion to the House.

Dr. David Clark: I beg to move, to leave out from "foodstuffs" to the end of the Question and add instead thereof:
`opposes the Government's intention to introduce irradiated food for import and sale in the United Kingdom; notes that irradiation exposes the consumer to chemical changes in food and that microbiologically contaminated food could be sold as clean; and believes that improving regulations and monitoring along the food chain are the best ways of solving the current epidemic of food poisoning and ensuring that the consumer has confidence in the safety of food.'.
It is sheer effrontery for the Government to bring this debate forward in such a restricted form when so many hon. Members want to participate. We know that when another Minister spoke on this subject a couple of weeks ago he assured the House that there would be ample opportunity for a good, long discussion on it. This is not the appropriate time at which to do it, but it exposes one of the Government's intentions, which is to try to minimise reporting of their proposed action.
What is the Minister proposing? Is he proposing to lift the ban regardless of what happens with the EEC? Will he lift the ban before the Community takes a decision? That part of his speech was a little confused.
The Minister started strongly, but he set up all manner of aunt Sallies that I have never heard before and then attempted to knock them down. I thought that he was disingenuous from the beginning. It has been the Government's policy not to update regulations, to reduce the number of public servants involved in monitoring food and to cut essential research into food safety. As a result, we have a food poisoning epidemic. There is no doubt about that.
The Government are contemplating cuts in the veterinary colleges when we are importing veterinary surgeons at a rate of one a day. They have reduced the number of personnel in the state veterinary service by 25 per cent. during the past 10 years. They have cut the training of environmental health officers so that we are now 400 short. They have cut vital research into salmonella and botulism. After 10 years of this Government, public health is at its worst for years.
For the Government, irradiation is a technological quick fix but, like so many other quick fixes, the long-term effect will be additional and fundamental problems. Before I pursue that, I shall take up one of the Minister's aunt Sallies. He mentioned radioactive food. He said that the


Opposition always argue that the food is radioactive. I have never argued that, and I have never heard any other Labour Member argue it.
Irradiated food is not radioactive. It is irradiated by a radioactive process. We should get that clearly on the record. It is done by using gamma rays. The easiest and best comparison is to radiotherapy for cancer. We all know that the use of a radioactive process poses a potential threat. The Minister is right—radioactivity is in the environment, but we must not expose people to extra radioactivity.
I am not suggesting that the consumer is affected, but I want the Minister to consider whether we can justify exposing people who work in food processing irradiation plants to extra radiation. The Minister shakes his head. I am just asking whether he thinks that that is justified. He is aware of the point because it was in the paper that he produced for his previous speech.
The key weakness in the Minister's speech was his acknowledgement of the fact that there is no adequate testing procedure. He advanced that argument two months ago. He said that there is no simple diagnostic test. It appeared from recent press reports that such a test had been devised but, on investigation, it seems that such claims are hollow. In a submission to Sub-Committee D in the other place, the Ministry said this morning:
There still seems little prospect that a single test will ever be applicable to all foods, and no guarantee even that tests for individual foods or food classes will be developed in the foreseeable future for every food likely to be treated by irradiation.
That is the Minister's view, and it is my view.
It is difficult to devise a proper monitoring and control system when it is not even possible to test whether food is irradiated. Even the Minister's own experts say that to guarantee public safety, irradiation levels must be below certain dosages. The Minister himself made that point tonight. The EEC document sets special dosage levels for separate products. As no diagnostic test is available, how can the Minister give an assurance about irradiation levels?
Further, how can food be tested to determine whether it has been re-irradiated? As the Minister knows, the kilogray levels are cumulative, and if food is irradiated at the maximum of 10 kilogray twice, it will have received a dosage of 20 kilogray, which exceeds the Government's safety level. In the absence of a diagnostic test, there is no way that irradiated food can be properly monitored.
The Minister and the EEC document both make the point that irradiated food must be labelled as such. It is widely predicted—the hon. Member for Orpington (Mr. Stanbrook) made this point again tonight—that most irradiated food will be used in the catering trade. I have put this question to the Minister before, and right hon. and hon. Members on both sides of the House await his answer: how can he ensure that the customer in a restaurant or cafe will be made aware that some of the food available there is irradiated? Will he give the House a guarantee that where irradiated food is used in a restaurant or cafe it will be identified as such on every menu? Unless the Minister gives such a guarantee, he cannot claim that the consumer will be offered a choice.
The argument extends from diagnostics and labelling to the process itself. As the Minister knows from previous

debates, not all bacteria are harmful and some perform a benign function. However, when a product is irradiated, all bacteria—good and bad—are killed, so irradiated food could still be contaminated by new bacteria. Furthermore, simply because food has been irradiated, it may be handled less hygienically than otherwise would be the case.

Mr. Christopher Gill: Will the hon. Gentleman give way?

Dr. Clark: No, because the Minister gave way only once, and then not to an Opposition Member.
If the bacteria load is only reduced, the bacteria remaining after irradiation can, unless the food is kept under appropriate conditions, multiply. It is our belief, and that of many food scientists, that many people will regard irradiation as an alternative to proper food hygiene. The public will be lulled into a sense of false security, and therein lies the danger.
Irradiation produces chemical changes in food—[Interruption.]Conservative Members may not be aware of this point—certainly the hon. Member for Sherwood (Mr. Stewart) is not. Irradiation's ability to cause chemical changes is known to cause a reduction in vitamins A, B, C and E. It is also known to produce highly reactive molecules called free radicals—although they are not political agents. There is evidence to suggest that free radicals can cause cell damage, including that of chromosones, increase the aging process and reduce immunity. The Minister scoffs, but I challenge him to say that the scientists who produced the evidence that I have cited do not know what they are talking about. Some of those scientists are advisers to the Government.
I know that the Minister's advisers have told him about one aspect of the content of food treated with pesticides, which is that that process often leaves residues. The Minister's own research consultative committee residues sub-group has expressed concern about the effect of irradiation on residues. The committee's minutes stated:
One area of concern was the irradiation of commodities which contained pesticide residues and associated inert substances and the possibility of these residues being transformed into more toxic radiolytic products.
The Minister must answer the point made by his consultative committee.
The Minister must also answer our charge—which he has denied—that irradiation could be used to make bad food appear to be good. Let us take the example of prawns, which are often imported from Asia and can be contaminated with all sorts of micro-organisms. If prawns are infected with hepatitis A, which is not uncommon in some of the waters in the far east, we do not know whether irradiation will kill the virus. All the evidence is that it will not, but we do not have sufficient information about it. That food could appear to be quite harmless and be eaten, although it might contain a high bacterial load.
I shall not discuss the case cited by the Minister and my hon Friend the Member for Stockton, North (Mr. Cook), but the Minister is aware of a case in 1965—

Mr. MacGregor: It was 1985.

Dr. Clark: I apologise. The Minister knows the case as well as I do.
Youngs Sea Foods—[Interruption.] It is rather worrying that, although the Minister is aware of the case, he is not prepared to face the consequences of it. In 1985 Youngs imported some Malaysian warm water prawns. A


month later they were retested, when it was discovered that they did not meet the company's standards. Those prawns were sent to Holland, where the Dutch firm Gammaster irradiated them, and they were then returned to this country and sold as clean food, mainly to caterers. That is an acknowledged case. The Minister is aware of it because he has seen the files. It was proven that food was irradiated and then sold as clean food.
Our prime objection to the Government's proposal for irradiation is that they consider it to be an alternative to cleaning up the food chain. That will lull the industry into a false sense of security. To illustrate my point I shall quote the British Poultry Federation, which is relevant because the Minister cited poultry towards the end of his speech. It said:
Following food poisoning scares, the industry was devoting considerable resources, time, skill and money to ensuring hygienic practice at every level of production and processing. BPF believed that this was right, and therefore not only did poultry not need to be irradiated, but its use might give the impression that these health measures had not been successful.
If, as the Minister told the House on 21 June, and repeated tonight, his reason for introducing irradiation is not to extend the shelf life, why do it? Far from making food safer, we believe that the Government's objective is simply to allow, on occasions, bad food to be sold as good —[Interruption.] Let me finish with this thought for the Minister. If the Government deny the charge, can they answer a simple, straightforward question? If food is in good condition in the first place, why is it necessary to irradiate it?

Sir Geoffrey Finsberg: One of the first rules that Oppositions learn if they refresh their memories with the book "How to be a Minister", by the right hon. Member for Manchester, Gorton (Mr. Kaufman), is that they must abuse the Government's case. That is precisely what happened for the first seven minutes of the speech by the hon. Member for South Shields (Dr. Clark); the rest showed very clearly that no one had been listening to what my right hon. Friend the Minister had said.
I came here with two or three questions to ask my right hon. Friend, because I had been worried by some of the scare stories that I had heard from both the Opposition and that self-seeking publicity organisation the London Food Commission. My right hon. Friend has made a variety of things very clear, the most important being that the consumer is to know whether an item has been irradiated. I am grateful to my right hon Friend for following the line that he took with those of us who were concerned about green-top milk.

Mr. Austin Mitchell: Will the hon. Gentleman give way?

Sir Geoffrey Finsberg: No; this is a short debate.
My right hon. Friend felt that if people were to have the choice whether to buy green-top milk they should at least know that there might be problems if they drank it. As long as we know, I do not believe that there is a problem.
My right hon. Friend went on to deal with another of my anxieties: if I went into the Members' Tea Room or the Harcourt Room, would I be certain of knowing whether a particular food had been irradiated? He made it clear that that would be taken care of when the details were worked

out. It is perfectly simple: all that will be needed is a small asterisk against the name of an item that has been irradiated, and anyone who suggests that it is more complicated than that is looking for difficulties. My right hon. Friend also made the important point that it is impossible to say that every kind of food will be irradiated: it is horses for courses.
The hon. Member for South Shields made much of the shortage of environmental health officers. This is not the first time that we have heard about that; those of us who have served for many years in local government first knew of them as sanitary inspectors, and there was a shortage of sanitary inspectors under various Governments. It is far too simplistic to say that the blame lies with the present Government.

Ms. Joan Walley: Will the hon. Gentleman give way?

Sir Geoffrey Finsberg: No. With the greatest respect, I have already said that I will not give way. If I do so, the hon. Lady will deprive some of her colleagues and mine of a chance to speak.
It is not correct to say that a shortage of environmental health officers is due to actions taken by the present Government. That shortage is due to the fact that the job may not be as popular as it used to be, or as it should be. It is not an easy job; under an inefficient council the environmental health officer may do a very good job of work and then find the council's legal department so incompetent that cases cannot even be taken. That will knock the stuffing out of a good, reliable EHO.
Having come here with two or three questions that have been worrying my constituents, I find that the Opposition have no case. My right hon. Friend has clarified the facts for the ordinary, sensible man and woman on the Clapham omnibus, and dealt with any worries that I may have had.

Mr. Geraint Howells: On this occasion the Minister has failed to convince the public and hon. Members that there is a need to have irradiated foodstuffs on the shelves in our shops. It is well known to us all that the proposal is opposed by just about everyone apart from food manufacturers. That does not speak highly of the directive.
There is no detection test to establish whether foods have been irradiated. The Institution of Environmental Health Officers stated:
Until adequate tests are available, several of the Directive's articles will be difficult if not impossible to enforce … consumer needs should be paramount and should take precedence over economic and technical needs.
It has been said that irradiation will be used to camouflage sub-standard batches of food, and it is for the Minister to clarify the issue when he replies. It is well known that the long-term effects of irradiation are unknown, as are the effects of other chemicals, such as pesticides, that may be present. I am told that tests have taken place on animals and that these may be unreliable. It is admitted in article 13 that there is a possibility that some health problems will occur in future.
The accepted dosage of 10 kilogray has been challenged by the British Medical Association's board of science. As long as the average of the batch is 10 kilogray, individual


readings of up to 15 kilogray will be permitted. That is another issue that the Minister should clarify when he replies.
As there is no simple test for irradiation, the Government propose to introduce controls through the registration of premises and inspections. This will probably be done by environmental health officers, and the hon. Member for Hampstead and Highgate (Sir G. Finsberg) has told us that we cannot blame the Government if there are not enough EHOs. The Government have been in office for 10 years and if the problem cannot be solved over that period, there is something radically wrong with the Government. I urge them to provide extra financial aid to ensure that we have more EHOs in the next two years. If there is a will, there is a way for the Government to do exactly that. We shall see whether we have more or fewer EHOs in 12 months time. The challenge is there for the Government to accept, and it will be interesting to see whether they do so.
We have been told that irradiated food from the Third world will be allowed into Britain. How do the Government propose to check the kilogray level or the quality of irradiated food from the Third world? Food that has been exposed to irradiation will not be labelled. It will be possible to sell such food to the public if it has been irradiated for checking purposes and the level of irradiation is under 5 kilogray. That blows a hole in the Government's case that consumers will be able to exercise their choice.
The real reason for the Government's move to accept irradiation is that some countries are irradiating food already. The Government want standardisation for 1992. The directive and the Government's move are designed to ensure that by 1992 we try to have everything in order in Britain. Perhaps the Government will regret their decision before 1992.
According to annex V of the directive, approval can be given for irradiation if
there is a reasonable technological need".
The health of the consumer is mentioned, but at a later stage. If irradiation is allowed, we should press for a ban on fractionalised dosage, a ban on any individual item having an irradiation level of more that 10 kilogray, proper funding for EHOs to enable them regularly to inspect premises, and proper labelling of irradiated food instead of the symbol that has been proposed by the EEC. The Minister must clarify that point. When he opened the debate he said that all food would be labelled, but according to the Community directive there is to be a symbol only. There is a big difference between a symbol and a label.
Food containing raw materials that have been irradiated should be labelled. The Government will say that 20 countries use irradiation, that 30 permit it, that there are no obvious health hazards, that it reduces the danger of salmonella and listeria poisoning and that food manufacturers are anxious to take advantage of the technology. I suppose they are, but the Minister should take note of the views of the British Poultry Federation. During the last six months, that sector of agriculture has been clobbered. If any sector of the industry needs help, it does.
According to the paper published by the British Poultry Federation, it is not very happy about irradiation, with

chickens being left on the shelf for long periods. The Minister should take the federation's views into account. Poultry farmers have been seriously affected by the Government's policies.
I hope that the Minister will take note of the views that have been expressed during the debate. The voice of the consumer, as well as the views of food manufacturers who are in favour of food irradiation, must be heard in this House.

Mrs. Ann Winterton: The irradiation of food, Mr. Deputy Speaker, is an emotive subject. [Interruption.] I think I have been corrected, Mr. Deputy Speaker, but I am a traditionalist. I hope you will not mind, Mr. Deputy Speaker, if I refer to you—

Madam Deputy Speaker (Miss Betty Boothroyd): Yes, I do mind.

Mrs. Winterton: You do mind.

Madam Deputy Speaker: I enjoy being a female. Vive la difference.

Mrs. Winterton: I take your point, Madam Deputy Speaker, but I had always understood that one addressed the office rather than the holder of the office, irrespective of gender. May I give another example? Many moons ago, in a previous existence, I was a master of foxhounds. Nobody called me a mistress of anything.

Madam Deputy Speaker: Order. I am very interested in the way that the hon. Member for Congleton (Mrs. Winterton) seeks to address various people, but while I am in the Chair I am to be addressed as Madam Deputy Speaker.

Mrs. Winterton: I am delighted so to address you, Madam Deputy Speaker. I bow to your command.
To return to the subject of the debate, food irradiation is an emotive subject. It will not be easy for hon. Members or their constituents to reach a rational decision as to its possible benefits. Many of us, myself included, do not have the scientific background to enable us to sift the facts from the fiction about food irradiation. Therefore, I was pleased to read recently the very first briefing paper of the newly established Parliamentary Office of Science and Technology which seeks to inform parliamentarians on scientific and technical matters underpinning current issues. Its director, Dr. Michael Norton, has prepared a paper on irradiation that is full of easily digested information, which I heartily recommend to hon. Members.
Many studies have been carried out on the irradiation of food for both animals and humans during the last 40 years, but concern remains about its potential use, despite the views of national and international expert bodies that the process is safe. The recent much publicised increase in the number of cases of food poisoning of one kind or another provide one argument as to how irradiation can play a part—I stress the word "part"—in providing greater protection for the public.
That brings me to what I consider to be the best marketing opportunity for fresh food for some time. It will not have escaped the notice of hon. Members that one of our most successful retail outlets has built a reputation second to none in its food department for quality,


freshness and good hygiene. That reputation is reflected to good effect in its sales and profits. In these more affluent days, people are prepared to pay more for fresh, good-quality products. I believe that, with correct labelling, a fresh chicken, for example, will outsell by far its irradiated counterpart. I suggest that that answers the questions raised by the hon. Member for Ceredigion and Pembroke, North (Mr. Howells).
The House should also note that the standards of production, processing and distribution of fresh foods in Britain are far higher than in virtually any other country, so I do not believe for a moment that irradiated food will provide any competition whatsoever, although it could prove useful in treating imported herbs and spices, for the reasons given by my right hon. Friend the Minister in his opening speech.
The high capital and running costs of irradiation equipment will be added to the price of the food and might easily outweigh any perceived benefits. However, mandatory labelling, with rigorous checks for the wholesale, retail and catering sectors, is essential to inform the consumer. More will have to be done in education in schools and elsewhere to provide people with the facts so that they can make an informed choice.
Finally, I would not hesitate to eat irradiated food, and I have probably done so abroad on many occasions without knowing it. Surely we shall have the best of both worlds in the United Kingdom as consumers will have available to them, where appropriate, irradiated and non-irradiated food. When they are fully armed with the appropriate information and when internationally recognised standards are introduced and rigorously enforced, there will be no problems whatsoever.

Mr. Martyn Jones: I shall be brief as there is so little time for this important debate. Far more time should have been devoted to it.
I should like to know who wants irradiated food. The public does not seem to want it. I have seen no great demands for it. The British Medical Association does not want it and nor does the Institute of Environmental Health Officers, but the food industry does.

Mr. Ron Davies: Not all the food industry wants it. The Co-op does not want it.

Mr. Jones: As my hon. Friend said, the Co-operative Wholesale Society, which is one of the largest retailers in the country, does not want it. Why do the others want it? They want it for profit and because it will be easier for them to deal with the food at the end of its production life and because the most disreputable outlets recognise it as a way of disguising poor manufacturing techniques.
I am a microbiologist by profession. Many hon. Members, particularly Conservative Members, are being misled.

Mr. Frank Cook: By the nose.

Mr. Jones: As my hon. Friend said, they are being misled by the nose and possibly by other parts of their anatomy. They do not seem to know what they are talking about.
As a microbiologist, I believe that the only objective test for the quality of food is the detection and enumeration of its bacterial load. If the food is irradiated there is no

objective test of its quality. The toxins produced by the organisms in the food will remain and will often be proportional to the original infection of the food. As the Minister said, food infections such as salmonella and listeria will be prevented, but genuine food poisoning will not. As the Minister should know, food poisonings are botulism and staphylococcal food poisoning. Staphylococcal food poisoning is one of the most common food poisonings and will not be prevented by the irradiation of food as staphylococcal food poisoning depends on the production of a toxin by the bacterium during its infective period—during the growth of the bacterium in the food.
The Minister did not say anything about the possible long-term effects. Judging by the way that we have discussed irradiation, one would think that it was extremely easy to kill bacteria by irradiating them. It is not. Bacteria are extremely resistant organisms. They are much more resistant than human beings. It takes about 4·5 kilogray to kill the average human being; it takes considerably more to kill the average bacterium and much more than that to kill the average spore. As the Minister said, we are not talking about spores being killed.
If spores survive and vegatative organisms do not, that means that the spores can germinate and grow after irradiation. Spore-bearing organisms are the most dangerous organisms in causing food poisoning. A dose that will kill a micro-organism does so in a particular way—by cell damage, due to the release of highly reactive radicals. They are basically produced by the splitting of water into its constituent parts. They last fractions of a second, but they react rapidly with other cell constituents. They create small quantities of esoteric chemicals which are not found in nature. No one knows, and none of the Minister's advisers can possibly know, about the long-term effects of exposure to those chemicals.
This does not happen just in the micro-organism. It happens in the main body of the food. Food consists of proteins, fats and carbohydrates in exactly the same way as micro-organisms do. Small amounts of exotic chemicals are being added to the food by dosing it with radiation. I could give a long list, but the ones that are easily detected are peroxidated fatty acids and hydroxlated aromatics.

Mr. Frank Cook: Do Ministers follow that?

Mr. Jones: I do not think that they do. Those components are produced in the food and sometimes affect it so much that it becomes inedible—the Minister must know about that. Those compounds are there, organoleptically, by taste, in some foods. They are also in the foods that are not affected by taste. No one knows how they will affect humans if consumed over a long period. If those chemicals were added as a preservative, they would not be allowed.
To say that labelling gives people choice is nonsense. One Conservative Member has said that that is impossible in restaurants. They will choose the cheapest prawns for their curry. They will not bother to say that the prawns have been irradiated. It would certainly put off customers if they did. Labelling is no use without a test that can prove irradiation. Such a test does not exist. If it did, it would be testing for the very chemicals that cause the problem in the long term. If we are talking about choice for consumers, we should not even consider irradiation of food.

Mr. Christopher Gill: I support the Government motion and oppose the Opposition amendment. I support the Government because they are being consistent with their policy to make their decisions in the light of the best available scientific evidence. There is an overwhelming weight of scientific evidence in favour of food irradiation. The toxicological, microbiological and nutritional effects of irradiation have been studied extensively and as a result the process has been declared safe by international and United Kingdom scientific committees. It has been tried and tested for decades—for more than 45 years. American astronauts, for example, take irradiated food on missions and in 1991, the first—

Mr. Elliot Morley: Will the hon. Gentleman give way?

Mr. Gill: No, because I am conscious of the fact that some of my hon. Friends and a few Opposition Members wish to speak.
In 1991, the first Briton in space will eat irradiated food with the cosmonauts aboard the USSR satellite MIR.
Throughout the Opposition's contributions to the debate there is an innuendo about a lack of control and labelling. One fact that they fail to mention, which has not so far been mentioned in the debate, is that the cost of an irradiation plant is between £3 million and £5 million. I venture to suggest that the Government will know exactly where the irradiation plants are. I am persuaded that that is a true statement of fact because I understand that, at present, no such plants are manufactured or available in the United Kingdom and would, therefore, have to be imported, thereby reinforcing my argument that the Government would know exactly where the plants were.
All known processes for preserving food rely on arresting or slowing the natural process of food spoilage. It is inconceivable that irradiation will make unsafe or bad food into good food.
The hon. Member for Ceredigion and Pembroke, North (Mr. Howells) made a point about the poultry industry. I agreed when he said that the poultry industry was hard pressed; most hon. Members would agree with that. However, he failed to appreciate that poultry producers will be able, when the legislation is passed, to choose to irradiate their product to make it safer for the consumer. The consumer, likewise, can then exercise his or her option to buy the irradiated product, which will give greater confidence in that product. Contrary to what the hon. Member for Ceredigion and Pembroke, North suggested, that could be a boon to the poultry industry and to poultry consumers. Let us make it clear that the Government are not compelling producers to irradiate their products.
The Opposition amendment refers to "chemical changes in food". Irradiation does not lead to any significant loss of vitamins in food and, as my right hon. Friend the Minister said, it does not make that food radioactive. The Opposition also talk about contaminated food being sold as clean food. If food is of an unacceptable microbiological standard before the process, those same factors will give it away after the process. That is a fact. The Opposition then speak about—[Interruption.] If Opposition Members listen, they might learn something. The best—

Mr. Michael Jack: Where ignorance is bliss, 'tis

folly to be wise.

Mr. Gill: I agree with my hon. Friend. The Opposition must agree with the following because they are their words. They talk of
the best ways of solving the current epidemic of food poisoning and ensuring that the consumer has confidence in the safety of food.
What they deliberately omit to say is that 90 per cent. of food-borne illness worldwide is caused by salmonella and campylobacter, according to the World Health Organisation. Surely the Opposition know that listeria, salmonella and campylobacter can all be dealt with effectively by food irradiation.

Mr. Alan W. Williams: My first point concerns dosages. In his statement in June, the Minister said that the dosages involved were very low—a maximum of 10 kilogray. I took it upon myself as a scientist to look up exactly what that meant. Suppose that, instead of food, one of us were in the conveyor belt going through the irradiating machine; the 10 kilogray dosage would be lethal. It is equivalent to the exposure that we would receive from 100 million chest X-rays. It would destroy every single cell in our body. Indeed, the purpose of food irradiation is to kill every live cell in food. When we hear talk of low doses of irradiation, we must recognise it as an absolute lie. We are talking about massive doses.
It is therefore not surprising that subjecting food to irradiation has a substantial effect on the carbohydrates, fats, proteins and every chemical component. It can also result in a cooked texture or rancid flavours of fats. When exposed, fruits and vegetables become soft because the cellulose molecules are broken down.
What particularly alarms me about the concept of irradiating food is that it produces prodigious quantities of free radicals—that is fragmented molecules—with molecules split in half, carbon-carbon bonds split in half and so on. Free radicals are very reactive and when they combine they form all sorts of mutants or deviants of their original structure. Irradiation will hydroxylate benzene rings and who knows what will be produced out of the food. As a former research chemist, my strong instinct—I have not yet gone into the subject fully—is that many of the products of irradiation will be carcinogenic.
When I examined the evidence for and against food irradiation in preparation for the debate, I found that the quality of the research into food irradiation, carried out 40 years ago and since, is very unsatisfactory. One finds a great deal of falsification of evidence and cheating, and many untrue claims have been published. There is evidence of lower birth rates, lower growth rates, kidney damage, increased incidence of tumours, chromosome defects and a lowering of resistance to disease—of the immune system —in animals fed with irradiated foods. I am most concerned, therefore, about the long-term safety implications for human health of eating large quantities of irradiated foods.
We have heard tonight of various committees making declarations about the safety or otherwise of irradiated food. For me, at any rate, the No. 1 organisation must be the British Medical Association, which has no vested


interest in irradiated food. It is interested only in the health of the population. I am sure that the Minister will be well aware that the BMA said in the conclusion to its report:
The Board believes that the current advice may not sufficiently take account of, still less exclude, possible long-term medical effects on the population.
If the BMA says that, we should listen. The non-scientists among us should bear that advice in mind.
We have heard that 35 countries allow food irradiation—125 do not. Of the 35 that do, only 21 use it, and in a trivial way, on very few foods; less than 0—1 per cent. of the food eaten in those countries is irradiated. It is no great answer to our salmonella, listeria and botulism problems. On an international scale, food irradiation is trivial.
The Government should listen to what consumers are saying loud and clear. According to every survey, they are saying that they do not believe that food irradiation is safe and that they will choose not to buy irradiated food. The Government have had some green pretensions in the past year or so but, as my right hon. Friend the Leader of the Opposition said the other day, it is a case of talking green but acting dirty. That is happening with irradiated food.

Mr. Richard Alexander: This year there has been an unprecedented upsurge in interest in food matters by the media and others, including the anti-egg lobby, the anti-cook-chill lobby, and the plain sensational lobby. The housewife does not know where she stands. All food is in danger of having bacteria in it. Most food has bacteria in it. All food that is not cooked properly is a danger. We must avoid poisoning from bugs in food. No one in his right mind eats raw food. The Government can exhort the housewife to cook food properly and manufacturers can tell her how best to do it, but, if she ignores those common-sense instructions, there will be food poisoning and people will harm themselves and have tummy upsets to a greater or lesser extent.
Irradiation has the power to eliminate most problems, yet, somehow, people are being made to fear irradiation, even though the Committee on Irradiated and Novel Foods has concluded that, subject to correctly applied doses, irradiation can be safe and food can remain wholesome. The House has heard from the Opposition that irradiation can make food look different.

Mr. Martyn Jones: Will the hon. Gentleman give way?

Mr. Alexander: I am sorry, I will not give way. I am short of time.
Irradiation cannot make any difference to the look of food; it just prolongs its useful life. Nor, as the hon. Member for South Shields (Dr. Clark) claims, will it encourage sloppy standards. People will not say that, because food is irradiated, they need not bother to cook it properly. That is another bad argument against irradiation. Irradiation kills the bacteria and bugs that cause food poisoning, and it also prolongs shelf-life.
It must be stressed time and again that irradiation cannot make bad food good. In a few years, irradiation will be as acceptable as cook-chill is now. [Laughter.] Yes, cook-chill is acceptable, and so is microwave cooking. I am not suggesting that it is compulsory. My right hon. Friend has said that people will be told when food is irradiated and they will be able to make their own consumer choice.
The British Poultry Federation, whose briefing has already been mentioned this evening, has made an

interesting point. It says, "OK, we have spent a lot of money on improving our produce and on reassuring the consumer that our food is first class. If we are doing all this, why should we then have irradiation on top of it?" That is a fair point, but perhaps the federation will have to live with it. We need the two standards of food production: first, at production level and, secondly, to prolong food life by irradiation, as is now proposed.
My right hon. Friend must take cognisance of hon. Members' concern about the implementation of the EEC proposals. They cannot be implemented until all the safeguards that have rightly been announced are in place.
Those safeguards will be vital in ensuring consumer confidence. Clear labelling and absolute certainty that the levels are safe and are not in any way cumulatively poisonous will be essential. It is vital that the consumer is reassured that there will be no harmful side effects. The experts have let us down so often over the years in food and other matters that the housewife is entitled to that belt and braces reassurance. We need that double assurance, but, once we have it, we would be foolish to turn our back on the technique. The Government have a public relations job to do in that area, and in carrying out that task they will certainly have my support.

Mr. Austin Mitchell: Grimsby is Europe's food town with the biggest concentration of food production and expertise in Europe.
It is important that we consider the views of the consumer who is reluctant to see the irradiation process introduced. I can be brief in giving the three reasons why I do not think that we should accept the directive and why we should not lift the ban. The first and most central one is that there is no way of detecting whether food has been irradiated. There is no way of checking on the process, which means that we cannot maintain effective controls. We do not know how many times food has been processed or whether it has been processed. Labelling is no use at all for consumers in restaurants, canteens or hospitals. How is the consumer at that level to know whether food has been irradiated? How are we in the House of Commons canteen to know? How are people in the Health Service to know, bearing in mind that the Health Service has rushed into cook-chill and accepted a weakening of its standards in that respect? The fact that there is no means of detection is one of the central arguments against accepting the directive.

Mr. Keith Vaz: Does my hon. Friend agree that the public's perception of this will be that the Minister's cavalier attitude to public health and food hygiene and his slavish support for this directive amounts to the legalised contamination of our food?

Mr. Mitchell: My hon. Friend is absolutely right. The public's fear of this process will not be allayed by the way in which it is being rushed through.
My second point bears on that. I am satisfied with what the Minister said about the process being policed in this country, but I am not satisfied that it will be policed as effectively in all the other EEC countries or that the Commission will maintain an effective control. How are we to know what happens in Spain, with its well-known


attitude to cooking oil? How are we to know that the process will be policed effectively in Greece or other countries?
My third point—again, it is a central point—is that the process will be used to disguise failure. The way to eliminate problems and to upgrade standards is by continuous improvements in inspection, control, regulations, and in the hygiene with which food is processed and treated. Irradiation is a way of disguising failure in those directions. I have outlined the way to improve things. Irradiation is a cheap and rather nasty alternative. On those grounds, we should support the amendment.

Mr. Ron Davies: I begin by raising a procedural point with you, Madam Deputy Speaker. I understand that, under Standing Order No. 14, you are empowered not to put the Question that we are debating if you consider that the matter has not been properly debated.
We are debating a matter of considerable importance. Although I make no criticism of the three Front Bench spokesmen who made their cases, they took half the time available for the debate. Many hon. Members of all parties have been trying to speak but have been unable to do so. All hon. Members who have spoken have been reasonable and have made speeches of only two or three minutes in an attempt to ensure that the debate covers all the issues. However, most importantly, we have had an admission from the Minister that, whether or not the European Commission approves the document that we are being asked to take note of tonight, the Government intend to act unilaterally by legislation and to lift the ban on food irradiation in this country.
Therefore, I submit to you, Madam Deputy Speaker, that this is not an ordinary debate. It is not a take-note debate; it is a major debate on a matter of major national importance. I shall submit to you at the close of my remarks the sincere request to consider not putting the Question that we are debating.
When the Minister opened the debate, he made much of the question of consumer choice. He presented the argument for irradiation as one that would assist consumers in making a choice as to whether they would wish to purchase irradiated food or not. I put it to the Minister that, if the freedom that he wants to extend to consumers is to be meaningful, people who are purchasing food must have the means to know whether that food has been irradiated or not. The central argument concerns the diagnostic test, which the Minister in his 15-minute address did not mention once, but which was raised by my hon. Friend the Member for Great Grimsby (Mr. Mitchell). The Opposition would take a different view if we knew that there was a diagnostic test. If it was possible to test whether food had been irradiated or not, consumers would be given a meaningful choice.
I put it to the Government that that originally was their view. Two years ago, I asked the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food for his view on labelling:
Is it the Government's view that labelling will have to be introduced but that, to make such labelling effective, there will have to be a system of tests to allow for independent analysis of products which might or might not have been irradiated?

The Parliamentary Secretary replied:
The hon. Gentleman has summed up all the difficulties that we presently have with regard to irradiation and people's fears of it. As he said, if we are to label products, there must be some way of testing whether irradiation has occurred." —[Official Report, 22 October, 1987; Vol. 120, c. 906–7.]
That was the Government's view two years ago. What has happened since to persuade them to change their mind? Could it have been salmonella, the importation of rotten meat from Ireland, listeria, or the exposure of the deficiencies in the Ministry of Agriculture, Fisheries and Food by the former Under-Secretary of State for Health? Something has happened to cause the Government to change their view. We have not heard one mention tonight of labelling. We will get instead a massive propaganda campaign at the public expense to try to persuade the public to accept irradiation.
The Minister and his colleagues may attempt to persuade the public. However, my hon. Friends the Members for Carmarthen (Mr. Williams) and for Clwyd, South-West (Mr. Jones) in their expert contributions—expert in the proper sense of the word—made it clear that the food industry is not convinced. We have heard that the British Poultry Federation, which represents all sectors of the poultry industry, is not prepared to countenance irradiation.
Nor is the shellfish industry—the one industry that we are told is particularly appropriate for the use of irradiation. The campaign against irradiation has, in fact, been led by the prime exponent of modern techniques in preserving shellfish—Mr. Ken Bell from Newcastle upon Tyne. He is the chief executive of a company of international esteem. In 1979, he received the Queen's award for export achievement. His view on irradiation is this:
Customers in Germany have actually told me that for them our promise never to sell irradiated products is a guarantee of their quality. In countries where food irradiation is legal, buyers and the consumer are unable to be sure whether the food they buy has been irradiated, or to know how it was contaminated in order to make irradiation necessary.
That was precisely the point raised by my hon. Friend the Member for South Sheilds (Dr. Clark), and precisely the point that the Minister and his colleagues failed to address in the debate.
We have heard supporting speeches from some of the Minister's friends, and we have heard the argument time and time again that "irradiation cannot make bad food good". That was the Minister's claim, and that was the parrot cry that came from Conservative Members. I have to tell those hon. Members, however, that the technology of irradiation is capable of precisely that. Conservative Members may not have the Indian Express, which is published in Bombay, on their daily list of required reading. I shall hand the Minister a copy of that paper dated 1 February 1989. If Conservative Members listen carefully they might learn something from one of its articles, which said:
Nuclear proliferation has arrived in India: not through the fabrication of high-profile atomic warheads, but through more subtle means.
It stated that the Indian Government had approved the use of irradiation and the article continued:
It was believed that the wastes from any town"—
human sewage—
could meet part of its ruminant feed requirements from sewage sludge which had been 'suitably disinfected'.
The technology that the Government are prepared to legalise in this country is now being used in the Third


world to disinfect human sludge to be recycled as animal feed. That is a case of technology going berserk. Tonight is also a case of the Government ignoring the dangers from BSE—bovine spongiform encephalopathy—and from the other ways in which food can be contaminated.
The case for irradiation has not been proved. I put it to you, Madam Deputy Speaker, that there is an overwhelming case on which you should rule tonight for this matter to be debated further.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Richard Ryder): Bacterial contamination of food by salmonella, campylobacter and listeria is an international problem. The Labour party's insinuation that it is confined to our shores or is more prevalent in Britain defies logic and merits mockery.
No panacea, no quick fix, to use the description deployed by the hon. Member for South Shields (Dr. Clark) and no magic formula can remove the problem altogether. That is why it is imperative to tackle food poisoning through a range of measures used at every stage of the chain—and irradiation must be one weapon in our large armoury.
Highly qualified scientists, men and women of great probity and distinction, drawn from the World Health Organisation, and from the Food and Agriculture Organisation firmly believe that food irradiation can help to reduce food poisoning by enhancing safety standards for poultrymeat, some shell fish and herbs and spices. Despite that, Labour Members have tried to argue that food irradiation is untested if not untried and, if not untested, is unsafe. Such claims are nonsense—minor triumphs of obliquity over reason.
There is nothing dangerously new about irradiation. Ionising radiation was first discovered in 1896 and its practical use was first pursued in 1921. Since then its value and safety have been checked and double checked by international scientists. They have confirmed the safety and wholesomeness of irradiated food and they have underlined its benefits to the consumer. The WHO, the FAO, the EC scientific committee on food and our Advisory Committee on Irradiated and Novel Foods chaired by Sir Arnold Burgen, the master of Darwin college, Cambridge, have all reached the same conclusions. Their evaluations have already led 35 other countries, including the United States, Japan, Socialist France, Socialist Spain, Socialist Norway and Socialist New Zealand.

Mr. John Home Robertson: Not Socialist enough.

Mr. Ryder: All right, perhaps Socialist Cuba will do. Despite overwhelming international approval for irradiation, the dear old Labour party casts aspersions on its safety. It shuns not only the advice of scientists, but its Socialist brethren Governments abroad.
I have a sneaking respect for the hon. Member for South Shields, but faced with the choice of accepting scientific advice on food safety from him or from the WHO, I opt for the latter. I fancy that if the Labour party was in power it would do the same.
The truth is that all the main international, reputable health agencies favour irradiation—35 countries permit it.

Irradiation may already be used in Britain for hospital patients with suppressed immune systems, but I do not hear the Labour party complain about that.
The process will be strictly controlled by licences and inspections. Irradiated food will be properly labelled. Consumers will have the freedom to buy irradiated food and they will have the freedom not to buy it.
In a bid to embrace as many emotive expressions as possible, the Opposition have cobbled together an amendment which succeeds only in combining ignorance with blinding glimpses of the obvious. The amendment observes that irradiation
exposes the consumer to chemical changes in food".
So what? Any method of processing food involves chemical changes. Simply heating food causes chemical changes. Does it expose the consumer to risks?
Contrary to what the Opposition appear to believe, chemical changes in food from irradiation are less than in other processes. I can only assume that the Labour party's ignorance on the subject is a voluntary misfortune. If it denies—

Madam Deputy Speaker: Order. I have listened very carefully to the comments of the hon. Member for Caerphilly (Mr. Davies) as, indeed, I have listened to this entire debate. I am also aware of the powers given to the Chair under the Standing Order. I believe that there has been adequate time for this debate and I must now put the Question.

Mr. Ron Davies: On a point of order, Madam Deputy Speaker. I understand your ruling, but can I ask you to reconsider? I am sure that the number of hon. Members who have been in the Chamber throughout the debate must be clear evidence that the House has not had sufficient opportunity to debate the issue. We need further debate. There are points of view that have not been expressed.

Madam Deputy Speaker: Order. As I have made clear, I have listened to this entire debate. I have heard every hon. Member who has spoken. I am aware of the seriousness of the matter, but I have a duty to perform, and that duty now is to put the Question.

Question put, That the amendment be made:—

The House divided: Ayes 127, Noes 182.

Division No. 297]
[11.46 pm


AYES


Ashdown, Rt Hon Paddy
Clark, Dr David (S Shields)


Barnes, Harry (Derbyshire NE)
Clay, Bob


Berth, A. J.
Clelland, David


Bennett, A. F. (D'nt'n &amp; R'dish)
Clwyd, Mrs Ann


Bermingham, Gerald
Cohen, Harry


Blair, Tony
Cook, Frank (Stockton N)


Boyes, Roland
Cook, Robin (Livingston)


Bradley, Keith
Cousins, Jim


Brown, Gordon (D'mline E)
Cox, Tom


Brown, Nicholas (Newcastle E)
Cryer, Bob


Brown, Ron (Edinburgh Leith)
Cummings, John


Bruce, Malcolm (Gordon)
Cunliffe, Lawrence


Buckley, George J.
Dalyell, Tam


Caborn, Richard
Darling, Alistair


Callaghan, Jim
Davies, Ron (Caerphilly)


Campbell, Menzies (Fife NE)
Davis, Terry (B'ham Hodge H'I)


Campbell, Ron (Blyth Valley)
Dewar, Donald


Campbell-Savours, D. N.
Doran, Frank


Carlile, Alex (Mont'g)
Dunnachie, Jimmy






Eadie, Alexander
Michie, Mrs Ray (Arg'l &amp; Bute)


Eastham, Ken
Mitchell, Austin (G't Grimsby)


Fearn, Ronald
Morgan, Rhodri


Fields, Terry (L'pool B G'n)
Morley, Elliott


Fisher, Mark
Murphy, Paul


Foster, Derek
O'Brien, William


Fyfe, Maria
Parry, Robert


Galbraith, Sam
Patchett, Terry


Godman, Dr Norman A.
Pendry, Tom


Gordon, Mildred
Pike, Peter L.


Graham, Thomas
Powell, Ray (Ogmore)


Griffiths, Nigel (Edinburgh S)
Primarolo, Dawn


Griffiths, Win (Bridgend)
Quin, Ms Joyce


Hardy, Peter
Redmond, Martin


Haynes, Frank
Reid, Dr John


Hinchliffe, David
Ross, Ernie (Dundee W)


Home Robertson, John
Ruddock, Joan


Howells, Geraint
Short, Clare


Hoyle, Doug
Skinner, Dennis


Hughes, John (Coventry NE)
Smith, Andrew (Oxford E)


Hughes, Simon (Southwark)
Smith, C. (Isl'ton &amp; F'bury)


Illsley, Eric
Smith, J. P. (Vale of Glam)


Ingram, Adam
Soley, Clive


Jones, Barry (Alyn &amp; Deeside)
Spearing, Nigel


Jones, Martyn (Clwyd S W)
Stanbrook, Ivor


Lamond, James
Steel, Rt Hon David


Leadbitter, Ted
Steinberg, Gerry


Lestor, Joan (Eccles)
Strang, Gavin


Livsey, Richard
Taylor, Mrs Ann (Dewsbury)


Lloyd, Tony (Stretford)
Thompson, Jack (Wansbeck)


Lofthouse, Geoffrey
Turner, Dennis


Loyden, Eddie
Vaz, Keith


McAllion, John
Wall, Pat


McAvoy, Thomas
Wallace, James


Macdonald, Calum A.
Walley, Joan


McFall, John
Wareing, Robert N.


McKelvey, William
Watson, Mike (Glasgow, C)


McLeish, Henry
Welsh, Michael (Doncaster N)


Madden, Max
Williams, Alan W. (Carm'then)


Mahon, Mrs Alice
Wilson, Brian


Marek, Or John
Wise, Mrs Audrey


Marshall, David (Shettleston)
Worthington, Tony


Marshall, Jim (Leicester S)



Martin, Michael J. (Springburn)
Tellers for the Ayes:


Meale, Alan
Mrs. Llin Golding and


Michael, Alun
Mr. Allen McKay.


Michie, Bill (Sheffield Heeley}



NOES


Alexander, Richard
Burt, Alistair


Alison, Rt Hon Michael
Butcher, John


Amess, David
Butterfill, John


Amos, Alan
Carrington, Matthew


Arnold, Jacques (Gravesham)
Cash, William


Ashby, David
Chalker, Rt Hon Mrs Lynda


Baker, Nicholas (Dorset N)
Chapman, Sydney


Baldry, Tony
Chope, Christopher


Banks, Robert (Harrogate)
Clarke, Rt Hon K. (Rushcliffe)


Batiste, Spencer
Conway, Derek


Bellingham, Henry
Coombs, Anthony (Wyre F'rest)


Bennett, Nicholas (Pembroke)
Coombs, Simon (Swindon)


Bevan, David Gilroy
Couchman, James


Blackburn, Dr John G.
Cran, James


Boscawen, Hon Robert
Currie, Mrs Edwina


Boswell, Tim
Davies, Q. (Stamf'd &amp; Spald'g)


Bottomley, Mrs Virginia
Davis, David (Boothferry)


Bowden, Gerald (Dulwich)
Day, Stephen


Bowis, John
Devlin, Tim


Brandon-Bravo, Martin
Dorrell, Stephen


Brazier, Julian
Douglas-Hamilton, Lord James


Brooke, Rt Hon Peter
Durant, Tony


Brown, Michael (Brigg &amp; Cl't's)
Dykes, Hugh


Buck, Sir Antony
Eggar, Tim


Burns, Simon
Evans, David (Welwyn Hatf'd)





Evennett, David
Marshall, John (Hendon S)


Fallon, Michael
Martin, David (Portsmouth S)


Favell, Tony
Maude, Hon Francis


Field, Barry (Isle of Wight)
Maxwell-Hyslop, Robin


Finsberg, Sir Geoffrey
May hew, Rt Hon Sir Patrick


Fishburn, John Dudley
Mellor, David


Forman, Nigel
Miller, Sir Hal


Forth, Eric
Mills, Iain


Fowler, Rt Hon Norman
Mitchell, Andrew (Gedling)


Franks, Cecil
Mitchell, Sir David


Freeman, Roger
Morris, M (N'hampton S)


French, Douglas
Morrison, Sir Charles


Gale, Roger
Moss, Malcolm


Garel-Jones, Tristan
Mudd, David


Gill, Christopher
Needham, Richard


Goodson-Wickes, Dr Charles
Nelson, Anthony


Gow, Ian
Neubert, Michael


Greenway, John (Ryedale)
Nicholls, Patrick


Gregory, Conal
Nicholson, David (Taunton)


Griffiths, Peter (Portsmouth N)
Nicholson, Emma (Devon West)


Gummer, Rt Hon John Selwyn
Norris, Steve


Hague, William
Onslow, Rt Hon Cranley


Hampson, Dr Keith
Oppenheim, Phillip


Hannam, John
Paice, James


Harris, David
Peacock, Mrs Elizabeth


Hawkins, Christopher
Porter, David (Waveney)


Hayes, Jerry
Powell, William (Corby)


Hayward, Robert
Raffan, Keith


Heathcoat-Amory, David
Raison, Rt Hon Timothy


Heddle, John
Redwood, John


Hicks, Robert (Cornwall SE)
Riddick, Graham


Hind, Kenneth
Ridley, Rt Hon Nicholas


Hordern, Sir Peter
Roberts, Wyn (Conwy)


Howard, Michael
Rowe, Andrew


Howarth, Alan (Strat'd-on-A)
Ryder, Richard


Howarth, G. (Cannock &amp; B'wd)
Sackville, Hon Tom


Hunt, David (Wirral W)
Sayeed, Jonathan


Hunt, Sir John (Ravensbourne)
Shaw, David (Dover)


Hurd, Rt Hon Douglas
Shephard, Mrs G. (Norfolk SW)


Irvine, Michael
Shepherd, Colin (Hereford)


Jack, Michael
Shersby, Michael


Janman, Tim
Skeet, Sir Trevor


Jessel, Toby
Smith, Tim (Beaconsfield)


Jones, Gwilym (Cardiff N)
Soames, Hon Nicholas


Jones, Robert B (Herts W)
Speller, Tony


Jopling, Rt Hon Michael
Spicer, Michael (S Worcs)


King, Roger (B'ham N'thfield)
Stanley, Rt Hon Sir John


Knapman, Roger
Steen, Anthony


Knight, Dame Jill (Edgbaston)
Stern, Michael


Knowles, Michael
Stevens, Lewis


Knox, David
Stewart, Allan (Eastwood)


Lawrence, Ivan
Stewart, Andy (Sherwood)


Lennox-Boyd, Hon Mark
Stradling Thomas, Sir John


Lester, Jim (Broxtowe)
Summerson, Hugo


Lightbown, David
Taylor, Ian (Esher)


Lilley, Peter
Tebbit, Rt Hon Norman


Lloyd, Peter (Fareham)
Thompson, D. (Calder Valley)


Lord, Michael
Trippier, David


Lyell, Sir Nicholas
Waddington, Rt Hon David


MacGregor, Rt Hon John
Watts, John


MacKay, Andrew (E Berkshire)
Wheeler, John


Maclean, David
Widdecombe, Ann


McLoughlin, Patrick
Winterton, Mrs Ann


McNair-Wilson, Sir Michael
Winterton, Nicholas


McNair-Wilson, Sir Patrick



Malins, Humfrey
Tellers for the Noes:


Mans, Keith
Mr. John M. Taylor and


Maples, John
Mr. Kenneth Carlisle.

Question accordingly negatived.

Main Question put and agreed to.

Resolved,
That this House takes note of European Community Document No. 10377/88, relating to irradiation of foodstuffs; and supports the Government's intention to seek to ensure that a directive is adopted that will allow the use of the process under conditions that will fully safeguard the interests of the consumer.

STATUTORY INSTRUMENTS, &c.

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &amp;c.).

SEAT BELTS

That the draft Motor Vehicles (Wearing of Seat Belts by Children in Rear Seats) Regulations 1989, which were laid before this House on 26th June, be approved.—[Mr. Maclean.]

Question agreed to.

PETITIONS

NHS Reform

Mr. John McFall: I should like to present a petition on behalf of my constituents, who have expressed deep concern about the proposals for the Health Service. Expressing a minority opinion, the Government in Scotland have set their face against consultation and listening to the Scottish people.
I present the petition on behalf of Robert McLearie and 5,000 other constituents. It was collected over a period of 68 Saturday mornings in my constituency, and its hallmark is the fact that it was not possible for everyone who wanted to sign it to do so: people of all social and political persuasions felt that the Government should think again and retain the integrity of the National Health Service, rather than devaluing the most precious political measure introduced in this century.
My constituents ask the House to pay heed to their sentiments,
and your petitioners, as in duty bound, will ever pray etc.
To lie upon the Table.

Prince of Wales Hospital, Rhydlafar

Mr. Rhodri Morgan: I wish to present a petition in the name of Jane Davidson and more than 22,000 residents of south Wales, who ask the House to beg the Secretary of State for Wales to reject the closure of the children's ward at the Prince of Wales orthopaedic hospital, Rhydlafar, near Cardiff.
The 12 bedded children's ward at the hospital is the only specialist centre for the treatment of orthopaedic problems for children in all the six counties of south and mid-Wales. Although the hospital lies within the purview of south Glamorgan and is therefore under the control of south Glamorgan health authority, the ward's closure would leave the vast majority of Wales without a specialist centre for the treatment of such problems. That is why feelings are so strong that a large number of signatories have signed the petition.

Wherefore your petitioners would pray that your honourable House will urge the Secretary of State for Health to reject any proposals for such closure brought before him by the South Glamorgan Health Authority. And your Petitioners, as in duty bound, will ever pray, etc.

To lie upon the Table.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Maclean.]

Toxic Waste Disposal (Cleveland)

Mr. Richard Holt: You, Madam Deputy Speaker, the hon. Members who have just rushed out of the Chamber and the members of the public who have left the Gallery are all responsible, in their individual ways, for producing toxic waste. That is not to suggest for a moment that they all work in a chemical factory or have their own test tubes at home. However, they wear clothes that come from a chemical base and they drive cars full of plastics and other chemically based products. We all buy well-wrapped goods, and all those wrappings are chemically based. Without the chemical industry, the country would find it difficult to maintain modern standards of life.

Mr. Tim Devlin: Many toxic waste compounds are generated in chemical-producing areas. Has my hon. Friend noticed that although we are discussing chemical waste in Cleveland no Cleveland Members are present on the Opposition Benches?

Mr. Holt: I am grateful to my hon. Friend for his intervention. I am grateful, too, that my hon. Friends the Members for Richmona, Yorks (Mr. Hague), for Darlington (Mr. Fallon), for Penrith and The Border (Mr. Maclean) and for Fylde (Mr. Jack) are in their places. I know that they have a deep interest in this subject. I am not surprised that Labour Members are not present because I am aware that they have come to a sorry state. The Labour party locally appears to be opposed to the introduction of any further incinerators in Cleveland but Labour Members have tabled an early-day motion—it has been signed by all the Labour party's Teesside Members bar one—that states:
A proven, safe and effective means of disposal, of almost all such compounds already existing, is incineration at appropriate temperatures under adequate pressure in suitable plant by qualified staff using correct procedures under proper supervision applying constant monitoring in accordance with a predetermined and approved specification".
I believe that that was extracted from one handout of one of the incinerator companies that is seeking to construct a plant in Cleveland.
Cleveland is not familiar to many people and its history is short. We in Cleveland are gradually moving away from the allegations of child abuse, only to find that the county is gaining a new reputation as the dustbin of Britain. Is it any wonder that almost every incineration company in the country is lining up to put its incineration plant in Cleveland? Nine applications have been submitted or are about to be submitted and one has been determined by the county council. The lay people who constitute the council rejected the best advice of their officers and the issue will go before my right hon. Friend the Secretary of State for the Environment for determination.
Let us imagine my right hon. Friend taking note of all the expert advice and reading the comments of the hon. Member for Stockton, North (Mr. Cook), who said:
We must be warned against giving the impression that chemical waste incineration was in itself a bad method of disposal. That is not true. In most cases incineration, using the right procedure, is the best way of doing it.
That is not how the people of Cleveland see it. I have received 1,200 letters from individual constituents telling me that they do not want one extra incinerator in Cleveland.

Mr. Devlin: I have received over 1,000 letters from my constituents on this issue. I think that all those who wrote agree with the view that Cleveland should do its bit to dispose of its own toxic waste if that is necessary. It is unrealistic, however, for every incineration company to establish a site in Cleveland. My constituents think—I certainly do—that the Government should provide a national scheme to distribute incinerators evenly throughout the country so that the entire burden does not fall upon Cleveland.

Mr. Holt: The management of toxic waste is a matter of major concern and it can no longer be left to local authorities. It is too great a responsibility to place upon them. That was clearly stated in the report of the Select Committee on the Environment, on which I have the honour to serve. In the Committee's report of February 1989 there was a clear recommendation that there should be 10 waste disposal authority areas similar to the new National Rivers Authority areas. Decisions should not be made by local councillors, who do not have the relevant expertise or knowledge. Their electors would never vote for them again if they supported having massive numbers of incinerators to dispose of toxic waste. That goes almost right across the board.
When I was talking to a journalist in the north-east I made the off-the-cuff comment that the Select Committee had been to Sharpness and that I thought it was very much the place where one could site a toxic waste disposal plant. It has all the attributes that we have in Cleveland. They went out of their way to tell us how good their roads are. They have a dock that is not used enough, good road access, the river Severn and a chemical works nearby, yet they panicked at the thought of having a chemical waste disposal plant in that area.
What is even more surprising is what was said in answer to the local Member of Parliament, my hon. Friend the Member for Stroud (Mr. Knapman). I take my hat off to him because he did a darned good job for the people in his constituency by getting the Secretary of State for the Environment, no less, to make a statement in the House of Commons on 26 April this year in which he said:
I can confirm that there are no sites taking hazardous waste in the Sharpness area or indeed anywhere in my hon. Friend's constituency and that there are no plans for any such hazardous waste sites there. If any hazardous waste site were to be proposed near the Sharpness canal or any other area in the lower reaches of the Severn, there would be severe water pollution problems,"—
I wonder whether anybody has told him about the river Tees? I wonder whether he has any idea what that river is like. My right hon. Friend continued by saying,
and that would be strictly against the provisions of the Control of Pollution Act 1974.
That would give Greenpeace a laugh in the north-east. He continued:
In addition, the necessary consents would, of course, be required."—[Official Report, 26 April 1989; Vol. 151, c. 943.] He does not go on to say, "They would be required from me, and I am not going to give them." But the hint was there—"There ain't going to be no plants there, or in south-west Surrey, or anywhere else, apart from poor old Cleveland.
We said in our report that the Government must have a policy and a strategy. Our report has been around for only about six months, so it is unlikely that there will be any action. To put a slight gloss on that, it seems to us that every time a particular subject is under discussion the


Government come up with a little bit of action. The question of contaminated land has been raised. For the first time in more than 10 years this week there was a Department of the Environment press release on contaminated land. Is that not something?
We also said in our report that there should be more of Her Majesty's inspectors of pollution. Their number is disgracefully low. What happened when we said that? There was a statement within a few weeks—we have not even debated the report yet—by Lord Caithness, who announced on 7 December that 13 additional inspectors were to be appointed, of whom nine would take over responsibility for waste. Remember that date, 7 December. They were tripping over themselves so fast that they managed to get the advertisements out by the middle of June. To date, no one has been interviewed. Because of the speed at which they work in the Department of the Environment, I doubt whether they have even opened the envelopes.
This crucial matter, however, affects the lives of my constituents, those of my colleagues' constituents and everyone else in the north-east. We are not getting a fair deal from the Government. If we are to get a fair deal from the Government, they must introduce legislation to control toxic waste. The problem is approaching crisis proportions. Everyone is becoming much more aware of the dangers that can arise from what was historically thought to be quite a safe thing to do—to dig a hole in the ground and stick stuff in it. We used to think it could be put out to sea and that somehow the fish would get rid of it. We now know that the best and safest method of dealing with it is probably incineration, although biodegradation may prove to be the long-term answer.
The Government must have a strategy to reduce the amount of toxic waste that is produced. In America that has been achieved with great success. Why are we waiting for a policy? We need a strategy, a policy and legislation on toxic waste disposal. It is grossly unfair that almost without exception disposal occurs in the north-east of England. There is some in the north-west and in Cheshire, but it is always where there are heavy conurbations.
I know that my hon. Friend will try to charm me, as she is a very charming lady, but she will not get me off her back until the Government take action.

The Parliamentary Under-Secretary of State for the Environment (Mrs. Virginia Bottomley): My hon. Friend the Member for Langbaurgh (Mr. Holt) has rightly raised a matter of considerable concern to his constituents. He has already seen me to discuss the subject earlier in the year. Apart from my hon. Friends the Members for Stockton, South (Mr. Devlin) and for Richmond, Yorks (Mr. Hague), he is the only Cleveland Member of Parliament to express strong concerns on the subject.
I appreciate the way in which my hon. Friend put the subject of toxic waste in its proper context. We have a growing chemical industry which has performed a wonderful service to mankind. Because of many of those advances, our life expectancy is now 77 years, whereas 100 years ago it was 44. My hon. Friend mentioned modern clothing and cars. The production of those assets of modern life inevitably produces dangerous and toxic substances that have to be disposed of. Toxic waste is only

a small part of the waste stream. About 26 million tonnes of domestic waste are produced annually, but only about 1·5 million tonnes of toxic waste.
My hon. Friend was less than generous in his comments about Government action in recent years. There has been a string of consultation papers and documents in pursuit of updating and ensuring that we have waste disposal laws that sufficiently recognise modern dangers and modern methods of dealing with toxic substances. Certainly my hon. Friend and other hon. Members have done valiant service on the Select Committee. They have earned an excellent reputation for taking up subjects of particular environmental concern. I pay a fulsome tribute to my hon. Friend and other hon. Members on that Committee.
Hazardous waste disposal is a particularly difficult subject. Strategies have to be adopted for different parts of the country to meet needs and in the broader context. I must point out to my hon. Friend that Cleveland sends waste to Ellesmere Port, Widnes, Macclesfield, Warrington, Thurrock, Southampton, Walsall and Hucknall. Neither are all the specialists plants, which require very high standards of performance, situated in the north-east or the north-west. Recently, I visited a plant in Southampton which was involved in that particularly difficult work.
As my hon. Friend has considerable expertise in the subject, he will know that the disposal of substances such as polychlorinated biphenyls, dioxins and other difficult chemicals requires combustion at a particular temperature for a carefully monitored period to ensure that they can be dealt with without adverse effect on the environment.
Local confidence is important. We believe that local authorities should be responsible for dealing with waste, which is closely related to planning matters. That is where we disagreed with the Select Committee.

Mr. Devlin: Is my hon. Friend aware that in January this year only 23 out of 79 waste disposal authorities in England had completed their waste management plans? Under great pressure, after 11 years, the figure is now, in July, only 58 out of 79. That means that 21 have still to complete their plans.

Mrs. Bottomley: My hon. Friend is right. Waste management plans have an important part to play. We have been pressing waste disposal authorities to ensure that their plans are in place. Cleveland produced a plan some time ago which made it clear that it believed that there was scope for further provision of incinerators in that area. We believe that the local authority must take this responsibility when establishing a plant. It is a matter first for the planning authority—in this case, the waste disposal authority, or the development corporation. Before any plant can operate, a licence must be secured from the waste disposal authority. Plants of the particular sensitivity that we are discussing tonight require prior authorisation from Her Majesty's inspectorate of pollution.
My hon. Friend the Member for Langbaurgh will be aware, given his experience, of the additional strength that we are giving HMIP and of our pursuit of the integrated pollution control approach whereby waste that is dealt with in water, put up chimneys or put on the land is considered across the spectrum by a team of inspectors. He


will be aware, because of his membership of the Select Committee, that the Government have made clear their intention to legislate at the earliest opportunity.

Mrs. Bottomley: My hon. Friend was less than generous about some of the comments that his Committee made about the Government's proposals. The proposal to introduce a duty of care on the producer of waste, the plans to establish registration for carriers and the plans to ensure that there is better licensing, better enforcement and better monitoring of waste disposal sites are matters where the Select Committee has recognised what the Government seek to do.

Mr. Holt: We told the Government.

Mrs. Bottomley: We appreciate the debate that is taking place. I do not want to vie with my hon. Friend about who was the initiator of such eminently sensible and good ideas. I can only ask him to look at some of the consultation documents that my Department has published over the years. It is right and proper that, as we near the end of our consultation period, we should move towards legislation that will do the job that we all wish to see done—deal safely and effectively with the waste which is an inevitable by-product of modern life, while ensuring that there is public confidence.
The Government seek to advise and assist waste disposal authorities through the work of Her Majesty's inspectorate of pollution, which has produced a series of well respected, long-standing waste management papers to provide local authorities with the latest information, technical guidance and scientific advice about the best ways of dealing with waste.
We look to local authorities to ensure that they conduct their waste regulatory functions effectively, and I am sure that my hon. Friend agrees with me on that point. It is envisaged in the plan that much of the provision within Cleveland will be by the private sector. My hon. Friend will be aware from the debate on the Water Bill of the arguments about the importance, where possible, of separating the regulation and operation of plants. We believe that, under our proposals, those plants will be much more effectively regulated and local authorities will face up to this responsibility without fear or favour.
We look to industry to work harder on waste minimisation. With the proposals for integrated pollution control, waste minimisation will become a material consideration for the first time. Recycling is equally important. My right hon. and hon. Friends in the Department of Trade and Industry are pressing industries to see what they can do to ensure that they do not produce waste unnecessarily.
The Cleveland county council waste disposal plan, which was produced in February 1987, was a comprehensive document. It envisaged that there would be a need for further provision in that area. As my hon. Friend has made clear on behalf of his constituents, there has been local concern—I have been aware of it—about the number of proposals that have come forward to respond to the need in his area to meet the market for waste disposal. Clearly no one envisages that all the different proposals will result in success. Five have come to

the notice of the regional office, but only one has been to the formal stage of a planning application. As my hon. Friend said, that was turned down by the county council. He will understand that I cannot comment specifically on that proposal, because it is likely to come to my right hon. Friend the Secretary of State on appeal, as he has a quasi-judicial role.
However, I want to emphasise clearly that waste disposal proposals for incinerators of this sophisticated, extremely expensive type, which require a great deal of investment, have first to go to the planning authority. Once they have been considered and accepted by the planning authority, they have to obtain a licence from the waste disposal authority. In addition, they have to have prior authorisation from Her Majesty's inspectorate of pollution. At every stage of the process, it is crucial that public safety and the protection of the environment are maintained. I hope that my hon. Friend will agree that in this country we have not brought forward our waste disposal legislation, I am pleased to say, on the basis of crises or disasters. We are almost unique in not having had any great disaster. Enforcement and regulation have taken place effectively. However, we recognise fully that in an advanced modern society we want to be absolutely confident that all the necessary steps are taken.
We look to local authorities to ensure that their plans are frequently reviewed. I recognise my hon. Friend's concern that some local authorities have not prepared the plans we should like to see. Her Majesty's inspectorate of pollution is in touch with local authorities on this matter and we look to further progress being made.
However, in a world in which development, progress and industrial advance add to our quality of life, we must recognise also that the by-products of modern life will be waste, and some of it is difficult and dangerous. We cannot wish such waste away. We cannot say that such waste should be elsewhere and turn our back on the problem. We must face up to those responsibilities. We are clear that, on the basis of a great deal of preparatory work, consultation and discussion, together with the consideration given to the problem by my hon. Friend and the Select Committee on the Environment, we are bringing forward proposals that will ensure that our waste is dealt with in a way that befits this nation as we move towards the turn of the century.
I want to thank my hon. Friend for his work in respresenting his constituents. He is a vigilant and valiant champion of his constituents. The number of times he keeps Ministers up late at night or early in the morning and the number of times that he brings delegations or makes contact with my right hon. and hon. Friends is legion. His constituents are truly fortunate to have a Member of Parliament who works so hard on their behalf. As my hon. Friend said, he plans to see my right hon. Friend the Minister for Local Government in the morning. That does not surprise me. He is a Member of Parliament who is a credit to his constituents and a credit to the House. I hope, as I have said, that as we move towards legislation on this important subject, we shall continue to have the benefit of his advice and experience.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Twelve o'clock.